By Sergio Goncalves
LISBON (Reuters) -The European Central Bank’s key interest rate is approaching its peak but further adjustments are still necessary, ECB Governing Council member Mario Centeno said on Wednesday, adding he expected rates to start easing at some point during next year.
“We must be approaching the terminal rate,” he told a press conference, adding that the ECB could reach the peak in June or July, always watchful of the inflation outlook.
Centeno said monetary policy was already at the peak of its cycle but suggested that smaller adjustments were still under way.
When that was complete, ECB policy would remain tight “for some more time, but without raising rates, which should start to come down at some point during the year 2024”, he said.
The ECB slowed the pace of its interest rate increases to 25 basis points on Thursday but signalled more tightening to come in what markets expect to be the final stage of its fight against inflation, with another 40 basis points of increases predicted for the ECB’s 3.25% deposit rate.
Centeno said he expected the “massive falls” in international prices of some raw materials, metals and food – in some cases, drops of 70% and 80% compared with a year ago – would translate into a “sustained reduction in consumer prices”.
Euro zone inflation accelerated last month to 7%, from 6.9% in March, far above the ECB’s medium-term 2% target, but core inflation, which excludes volatile food and fuel prices, eased unexpectedly.
“What we need to see is that the nature, the characteristics of the process of reducing inflation gives us some comfort that it will be at the end of 2024 or beginning of 2025 sufficiently close to the medium-term target of 2%,” Centeno said.
(Reporting by Sergio Goncalves; Writing by Andrei Khalip; Editing by Alison Williams, David Latona and Alex Richardson)
