Mario Centeno, the governor of the Bank of Portugal and the governing board of the European Central Bank, said on Wednesday that the European Central Bank's rate hike cycle may be over as inflation in the euro zone falls faster. "Under the current circumstances, we can expect that rate hike cycle to have run its course by now," he said.
The ECB's September decision "brings the necessary predictability to monetary policy by explicitly mentioning that the current level of interest rates is consistent with the medium-term inflation convergence target of 2%," he said. The ECB has raised rates at each of its past 10 meetings but signalled it would pause in October, sparking a debate among policymakers about whether monetary authorities have finished raising rates or are still considering further tightening.
Centeno warned that while the ECB's nominal interest rate is likely to remain stable for now due to falling inflation, real interest rates - which directly affect businesses, households and the economy - are still expected to rise, requiring "caution in making decisions in the near term." Centeno added:" The transmission of monetary policy is delayed, takes time to happen and does not affect all countries in the same way at the same time. "