Centeno warns that the European Central Bank may cut interest rates before May

The Governor of the Bank of Portugal and member of the European Central Bank (ECB) said that inflation is more stable and that interest rate cuts could start soon.

“I don’t think it is necessary to wait until May to make decisions,” Mario Centeno said in an interview with the website. “Econostream”.

Mario Centeno's thinking contrasts with that of other ECB members who prefer to make a decision only after receiving more data on the development of salaries throughout 2024.

He added: “The decision to keep nominal interest rates unchanged at this time is appropriate and we will decide when to reduce them sooner than we thought.”

Regarding wage data, he stressed that there is no indication that “the effects of the second round on wages have been achieved or will be achieved, or that wages will put additional pressure on prices.”

“The variable pressure on inflation is not wages, but unit labor costs,” he said.

Centeno noted that high inflation was a “temporary phenomenon” both at the headline and core inflation levels.

He said: “The latest inflation numbers tell us two things: first, that the decline in inflation will happen sooner than we thought six months ago, and second, that the monetary easing process will be faster than we thought six months ago.”