In an MNI interview, ECB Executive Board Member Frank Elderson responded to the speculation on whether interest rates have reached their pea. He noted, “Does that mean policy rates have peaked? Not necessarily. There is still a lot of uncertainty.”

Elderson emphasized the efficacy of the decisions taken by ECB, remarking, “we consider that, with the decisions we’ve made and on the basis of our current assessment, the current interest rate levels will make a substantial contribution to us reaching our inflation target in the medium term.”

Refraining from speculation, he underscored the bank’s methodical approach: “we take these decisions meeting by meeting, on a data-dependent basis. Making any predictions about what we will do next would not be consistent with that approach.”

Highlighting the challenges in the euro area’s economic performance, Elderson revealed, “What we’re seeing is a more protracted period of sluggish growth than we were expecting.” He pointed out several contributing factors to this slowdown, including “lower demand for euro area exports, the impact of tighter financing conditions, lower residential and business investment, and the weakening services sector.”

Yet, not all indicators spell caution. Offering a balanced view, Elderson noted the resilience in certain sectors. “On the other hand, labour markets are still strong and disposable income is expected to rise, which would have a stabilising effect on overall GDP growth.”

Full interview of ECB Elderson here.

ECB Governing Council member Madis Muller said today he does not anticipate any further hikes in interest rates for the time being.

The significant question is on the duration for which borrowing costs might remain at heightened levels. Expounding on this, he mentioned, “will depend on how the euro-area economy develops over the year and how the slowing of inflation plays out.”

Highlighting the current economic climate, Muller stated, “Right now, we see that the economic situation is relatively weak in the euro area as a whole.”

He, however, expressed a cautious optimism about the region’s economic future, noting the potential for modest improvements. ”

Looking forward, it could start improving slightly. If the recovery is slower, then that means smaller pressures in terms of inflation,” Muller added.

ECB President Christine Lagarde, in her address to a European Parliament committee, expressed confidence in the current policy rates, emphasizing their effectiveness in steering inflation back towards the intended target.

“Based on our latest assessment,” Lagarde mentioned, “we consider that our policy rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.”

Lagarde also highlighted the headwinds faced by the euro area’s economy. After broadly stagnating during the first half of 2023, the economy has demonstrated signs of weakening further in the third quarter. This is particularly concerning given the previously resilient services sector, which is also starting to display weakness.

Lagarde elaborated, “The services sector, which had been resilient until recently, is now also weakening,” noting that “job creation in the services sector is moderating and overall momentum is slowing.”

Domestic price pressures, however, continue to remain formidable. A surge in holiday and travel spending combined with substantial wage growth is holding up services inflation.

Nevertheless, according to staff projections, “inflationary pressures are expected to moderate and that inflation is set to reach our target by the end of 2025.”

Full remarks of ECB Lagarde here.

In today’s conference in Madrid, Pablo Hernandez de Cos, a member of the ECB Governing Council, emphasized the need for patience in the bank’s approach to interest rates.

De Cos pointed out, “If we keep rates at these levels long enough, there are very good chances that we will be able to reach our 2% target in a timely manner.”

De Cos added that a balanced approach was crucial “to avoid both insufficient tightening, which would impede the achievement of our inflation target, and excessive tightening, which would unnecessarily damage economic activity and employment.”

Echoing a similar sentiment, fellow Governing Council member Francois Villeroy de Galhau warned against an aggressive tightening stance. He said, “If the ECB tightens too much, the central bank could run the risk of having to rapidly reverse course.”

Villeroy de Galhau further advised against a reckless calibration of monetary policy, asserting, “‘testing until it breaks’ is not a sensible way.” Instead, he recommended a shift in focus from constantly elevating rates to maintaining a consistent policy. In his words, the emphasis should be on “duration rather than level.”

ECB Governing Council member Francois Villeroy de Galhau spoke about the current monetary policy outlook in an interview with France Inter radio on Saturday. Emphasizing the need for a patient approach, Villeroy stated, “From today’s perspective, patience is more important than raising rates further.”

He highlighted the current deposit rate, which stands at a record 4%. According to Villeroy, this level should be held steady as it plays a crucial role in controlling inflation within Eurozone.

Amid concerns over the potential inflationary impact of rising oil prices on the global economy, Villeroy remained steadfast in the ECB’s commitment to its objectives.

“The recent increase in oil prices won’t derail the European Central Bank’s fight to tame inflation,” he asserted. Elaborating further on this, he said, “We’re very attentive, but [this] doesn’t put into doubt the underlying disinflation.”

Villeroy reiterated ECB’s target: “Our outlook and engagement is to bring inflation to around 2% in 2025.”