(Bloomberg) -- The European Central Bank shouldn’t keep interest rates too high for too long as doing so could damage the economy, according to Executive Board member Piero Cipollone.
In an interview with Le Monde published Wednesday on the ECB’s website, the Italian official said that “there is a real risk that our stance could become too restrictive.”
“We must ensure that inflation converges to our target without holding back the economy unnecessarily, because we desperately need investment and growth in Europe,” Cipollone said. “Every delay in this area puts us at a serious disadvantage.”
The comments come just before a week-long quiet period that precedes the ECB rate-setting meeting on Sept. 11-12, where policymakers are widely expected to reduce borrowing costs again after a landmark cut in June.
“The data so far confirm our direction of travel and I hope that they will allow us to continue to be less restrictive,” said Cipollone, who’s seen as one of the most dovish members of the Governing Council.
Even if borrowing costs are lowered further, policy “will remain restrictive,” Greek central-bank chief Yannis Stournaras said in separate comments published in Imerisia.
His Latvian counterpart Martins Kazaks, meanwhile, backed a rate cut next week.
“Rates have to go lower because the biggest part of the inflation problem has been solved,” he told Latvian TV on Wednesday. “The discussion is only about how quickly and how strongly.”
The rate path beyond September is less clear, with some policymakers fretting about undershooting the 2% inflation target, especially as the euro zone’s 20-nation economy loses momentum, while hawks fear that loosening policy too rapidly would risk reigniting prices.
Cipollone said that officials “shouldn’t be afraid of wages increasing faster than inflation for a while, having risen at a slower pace previously.”
“Otherwise, I don’t see how we can sustain the recovery and, in turn, the rebound in productivity,” he said. “We are not seeing a wage-price spiral. It’s a natural catching-up that is healthy for the economy.”
--With assistance from Aaron Eglitis and Sotiris Nikas.
(Updates with ECB’s Stournaras in sixth paragraph.)
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