Pablo Hernandez de Cos, a member of the European Central Bank's (ECB) Governing Council, stated on Monday that keeping current borrowing costs stable could help Euro-area inflation align with the ECB's 2% target. This strategy is designed to strike a balance between avoiding insufficient tightening, which may obstruct reaching the inflation goal, and excessive tightening that could potentially harm economic activity and employment.
The ECB has been engaged in an unprecedented tightening campaign, marked by ten consecutive interest-rate hikes. The focus is now shifting towards ensuring that borrowing costs remain sustainably high to curb consumer price growth effectively.
Inflation data due to be released later this week will provide crucial insights into how successful policymakers have been in their efforts to control inflation. Despite signs of slowing down, the inflation reading for September is projected to exceed 4%, more than double the ECB's target.
During a conference in Madrid on Monday, De Cos expressed optimism about the current strategy's potential success. He stated that if rates remain at their current levels for an extended period, there is a strong likelihood that the 2% target can be reached promptly.
The ECB's approach underscores the importance of carefully calibrated fiscal measures in managing inflation and ensuring the stability of economic activity and employment. The upcoming data will be closely watched as it will indicate whether this approach is yielding the desired results.
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