ECB’s Wunsch: Central bank to keep raising interest rates unless wage growth slows – FT

In an interview with the Financial Times (FT) on Monday, Pierre Wunsch, the European Central Bank’s (ECB) Governing Council member said that the central bank will continue raising interest rates until wage growth slows.

Key quotes

“We are waiting for wage growth and core inflation to go down, along with headline inflation, before we can arrive at the point where we can pause.”

“I would not be surprised if we had to go to 4 percent at some point.”

“What we try to do is always to go for a soft landing and nobody is going to err on the side of destroying the economy for the sake of destroying the economy,” he said. “But I have absolutely no indication that what we are doing is too much.”

“I’m not a fetishist. I’m not going to hike rates even in a recession just because we have 2.3 percent or 2.1 percent inflation in the two-year forecast. But I’m not seeing inflation numbers going in the right direction yet.”

“If we see wage agreements remaining around 5 percent growth for longer than this is going to be in the forecast and then inflation is not going to go back to 2 percent on a structural basis.”

Market reaction

These comments fail to yield any positive impact on the Euro, as EUR/USD is holding the lower ground near 1.0980, trading modestly flat on the day.