(Bloomberg) -- The European Central Bank should be able to continue to ease policy, but must be mindful of consumer-price growth, according to Governing Council member Pierre Wunsch.
“In our base scenario, if our forecast becomes reality, we should be able to reduce interest rates further,” he told Belgium’s VRT in a television interview on Sunday. “But I see a small risk that it’ll happen more slowly if services inflation remains elevated.”
Wunsch spoke three days after the ECB cut rates for a second time, with President Christine Lagarde hinting that another such move might be more likely in December — rather than at the next meeting in October.
Consumer-price growth “seems to be more or less under control,” the Belgian central bank chief said. “But services inflation — inflation without goods and energy — remains very high, about 4%. So it’s not that easy and if the recovery is coming, and we hope that it is, it’s well possible that inflation will remain above 2% for a longer period.”
The ECB last week stuck with its inflation forecasts and predicts consumer-price growth will hit the 2% target by the end of 2025.
“The recovery in Europe is getting slower,” Wunsch said “We thought that we’d see a recovery in 2023, but that didn’t arrive. In 2024, it’s going relatively slow. It’s still partly cyclical, but increasingly structural.”
Wunsch, who heads Belgium’s central bank, also said:
- As Belgium, “we no longer have any safety cushions to deal with future shocks or crises. We were able to do so with Covid and the energy crisis. But with a deficit that, with unchanged policy, tends toward 6%, we will no longer have any power to repeat this in the future.”
- Asked about the Sept. 20 deadline to submit mid-term budget plans to the European Union, Wunsch said:
- “It’s not about a week or a month. I think the quality of what’s on the table is more important than a delay of 15 days. Europe said clearly if there’s no government we can understand that the plan comes a bit later. Quality matters more. But we cannot wait 500 days. It has to happen toward the end of this year.”
©2024 Bloomberg L.P.
