Centeno from the European Central Bank anticipates a rise in inflationary pressures.
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In a recent interview with Reuters, Mario Centeno, a member of the governing council of the European Central Bank, shared his insights on current economic conditions. The interview took place in Lisbon, Portugal on March 15th, 2021. IMAGE DESCRIPTION: A picture of Mario Centeno speaking during a previous interview. IMAGE SOURCE: REUTERS/Pedro Nunes
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On Monday, Mario Centeno, who works for the European Central Bank, cautioned that even though interest rates have gone up quickly to combat inflation, there are signs suggesting that inflationary pressures may still be growing in the future.
During an event in Lisbon, he stated that it's not really the elevated level of interest rates, but rather the velocity at which they are increasing that is concerning.
According to Centeno, there is a possibility that the prices of finished goods may continue to remain high despite the recent drop in prices of raw materials and agricultural products, which had caused a significant hike in the former.
"The current situation makes it unsustainable to keep charging the same prices for our products. This leads to prices staying consistently high," he stated. He encouraged businesses to prevent the negative effects of increased wages on prices and the expansion of their profit margins.
The rate of inflation in the Euro zone went down to 8.5% in February compared to the previous month's 8.6%. However, core inflation, which excludes the unstable prices of food and fuel, went up to 5.6% from 5.3%. This suggests that the increases in energy prices in the past are affecting the economy as a whole.
Even though a few investors urged caution in tightening policies until the banking sector settles down, the ECB went ahead with raising its refinancing rate to 3.50% by 50 basis points on Thursday. This move suggests that they may increase rates again in the future since their forecast predicts that inflation will continue to exceed their 2% goal until 2025.
Sergio Goncalves provided the report while Andrea Khalip wrote the article. Kevin Liffey edited the piece.
