The member of the Executive Committee of the European Central Bank (ECB), Piero Cipollone, believes that interest rates can be lowered “quickly” even though European employees continue to receive revaluations in their payrolls to offset the impact of the crisis.
“If the incoming data confirms the scenario foreseen in the March projections, we should be prepared to quickly reduce our restrictive monetary policy,” he stressed during an event held in Brussels this Wednesday.
According to Cipollone, waiting for more data before beginning rate normalization would provide “additional support” against a possible rebound in inflation. However, the spokesperson has asked for “proportionality”, since the macro perspectives are not favorable.
“Excessive attention to short-term wage developments may not take full account of a recovery in wages that can and must occur so that the recovery of the euro area, currently fragile, acquires a more solid basis,” he argued.
Salary adaptation
The ECB’s newest member has stressed that pay increases must be reduced over time. According to Cipollone, the growth of the wage bill “seems to be gradually moderating” in the medium term with levels consistent with the need to stabilize prices around 2%.
Thus, he has indicated that maintaining rates longer than necessary could jeopardize the recovery and the cyclical rebound in productivity growth. “This would be economically costly and would induce risks for the sustained convergence of inflation towards our objective,” Cipollone concluded.
