(Bloomberg) -- The decision for the European Central Bank to lower interest rates next month is straight-forward, according to Governing Council member Mario Centeno.
“Of course the most likely move in terms of monetary policy is to continue cutting rates,” the Portuguese central-bank head said Friday at the Federal Reserve’s annual conference in Jackson Hole.
“September — it’s easy,” he told Bloomberg TV’s Lisa Abramowicz and Tom Keene. “October is going to be a funny meeting. It’s always dependent on data. But it’s not on data points, it’s on data trajectories. We don’t look at data points, we look at data trends.”
In less than three weeks, officials must decide whether inflation in the euro area is moderating sufficiently to allow a second rate cut following June’s initial move. Consumer-price growth was stronger than expected in July, with services inflation still sticky, but new data Thursday showed a significant slowdown in wage gains during the second quarter – something the ECB is very much focused on.
Investors are betting on a cut next month and a total of two to three more reductions this year – also in light of a deteriorating backdrop for economic expansion.
Centeno, one of the ECB’s more dovish officials, highlighted the dangers to the region’s economy, which in his opinion is “not growing.” That suggests monetary policy should be eased as soon as is possible.
“We need to bring inflation down with the lowest possible sacrifice,” he said. “There has been quite a bit of a sacrifice in Europe to bring inflation down. Even in this soft landing story we don’t grow.”
--With assistance from Marilen Martin.
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