ECB chief warns of continued inflation

European Central Bank President Robert Holzmann warns that the persistence of inflation is underestimated. He said this in an interview with Chilean LT Pulso.

The newspaper quoted the head of the Austrian Central Bank during a visit to the Chilean capital, Santiago: “I truly believe that the extent to which inflation will persist is underestimated.” He was the only member of the ECB’s Governing Council who did not support cutting interest rates at the beginning of June.

Holzman justified this by saying that the data-driven policy path must be driven by data, and that he based his decision on the latest data on the economy.

At the beginning of June, the European Central Bank lowered interest rates

In early June, the European Central Bank delivered its first interest rate cut since 2019, after inflation in the eurozone fell significantly. The central bank will start raising interest rates at a record pace from mid-2022 to combat high inflation. Higher interest rates dampen economic growth and, therefore, inflation.

Holzmann also said in the interview that cutting rates too early is riskier than cutting rates too late. Cutting rates too slowly, he says, “could temporarily lead to somewhat lower growth.”

“If you act too quickly and then create new inflation, you will probably have to raise interest rates again,” he says.

At the beginning of this year, the Director of the European Central Bank pointed to the risks of inflation due to the unrest taking place in the Middle East and the Red Sea due to Houthi attacks on shipping.

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