FRANKFURT — The European Central Bank must act decisively to control inflation and ensure the central bank does not lose credibility, Vice President Luis de Guindos said today.
His comments come a week after the ECB announced a record 75 basis point interest rate hike and signaled further tightening ahead.
“Monetary policy should be geared towards price stability and meeting our medium-term inflation target,” de Guindos said in a speech addressing current policy challenges. “Determined action is essential to keep inflation expectations anchored, which in itself helps to ensure price stability and avoid the side effects of inflation.”
While headline inflation hit 9.1% in August and is expected to rise further, most measures of long-term inflation expectations are still around the ECB’s 2% target. However, recent above-target revisions to some indicators have raised concerns among policymakers, who pledged to monitor developments closely.
The ECB has been criticized for reacting too slowly to soaring prices. De Guindos warned that the central bank must not compromise its credibility. “Central banks’ main asset is credibility, and this asset becomes even more important in times of high uncertainty.”