ECB’s de Guindos says changing inflation goal will hurt credibility

THE European Central Bank (ECB) will not revise its mid-term price stability goal of 2 per cent as that would undermine credibility, vice-president Luis de Guindos said, adding that it was determined to keep raising interest rates to combat inflation.

“I can say that we are not going to review it, even less so when our inflation is at 10 per cent,” he said at an event in Madrid on Monday (Dec 19).

“It would send a message that would generate a lot of uncertainty and central banks rely on their credibility (...) that is the last thing we should do.”

The ECB had on Thursday eased the pace of its interest rate hikes but stressed that significant tightening remained ahead while laying out plans to drain cash from the financial system as part of a dogged fight against inflation.

“There will be more interest rate hikes, until when, I don’t know. I am absolutely honest, I don’t know,” De Guindos said.

The ECB’s rate action followed similar moves by the US Federal Reserve and Bank of England (BOE) last week.

The BOE raised the rate it pays on bank deposits by 50 basis points to 2 per cent, a compromise decision after a large group of conservative policymakers pushed for a bigger increase. It also signalled it would do the same at future meetings. REUTERS