FRANKFURT — The European Central Bank must act decisively to control inflation and make sure the central bank does not lose its credibility, Vice President Luis de Guindos said today.
His comments come a week after the ECB delivered a record 75-basis-point interest rate hike and signaled further tightening ahead.
“Monetary policy needs to be focused on price stability and on delivering our inflation target over the medium term,” de Guindos said in a speech addressing current policy challenges. “Determined action is essential to keep inflation expectations anchored, which in itself contributes to delivering price stability and avoids second-round effects in inflation.”
While headline inflation has hit 9.1 percent in August and is expected to rise even further, most measures of longer-term inflation expectations still stand at around the ECB’s 2-percent target. However, recent above-target revisions to some indicators sparked worries among policymakers, who pledged to monitor developments closely.
The ECB has faced criticism for reacting too slowly to surging prices. De Guindos warned that the central bank must not jeopardize its credibility. “The main asset that central banks have is credibility, and this asset becomes even more important in times of high uncertainty.”
