The ECB should be patient, even if the unfavorable scenario in the economy begins to materialize. This was stated by the ECB representative.
“The euro area economy may be heading towards an unfavorable scenario for the European Central Bank, but policymakers need to remain patient and not rush to change interest rates to curb inflation,” said ECB board member Alexander Demarco.
The ECB presented three inflation and growth scenarios last month and policymakers are now debating whether to raise interest rates to prevent an energy-driven inflation spike that could trigger a self-sustaining price spiral.
“My impression is that at this stage we may be shifting towards the unfavorable scenario,” Malta’s central bank governor Demarco told Reuters on the sidelines of the IMF’s spring meeting.
Moldova is also waiting
The situation is the same in Moldova. Although inflation expectations are high and annual inflation has accelerated to 6.8%, the prime rate is in neutral. The NBM is not in a hurry with urgent measures, although the price growth is not quite in line with the target.
Representatives of the executive branch do not see much reason to take emergency measures, including by curbing inflation expectations, arguing that even if there is a risk of consolidation of price growth, there is no convincing evidence of it yet.
If expectations remain stable, the conflict turns out to be temporary, and business signals do not indicate a significant adjustment of selling prices, then there are reasons to wait with the increase.
