Portuguese bank chief: ECB may need to accelerate interest rate cuts – POLITICO

LISBON – The European Central Bank may have to up the pace of interest rate cuts as data published since last week’s cut suggest growth and inflation could fall short of the Bank’s new projections, said rate-setter Mário Centeno.

 “Given the position in which we are today, in the monetary policy cycle, we have really to minimize the risk of undershooting, because that’s the main risk,” Centeno, Bank of Portugal Governor and a member of the ECB’s Governing Council, told POLITICO in an interview.

Centeno’s remarks are the clearest sign yet that an interest rate cut on October remains a real possibility, as the ECB wrestles with the problem of how fast to ease policy in an economy struggling to build any momentum, but also struggling to conclusively defeat inflation.

 ECB President Christine Lagarde hinted last week, as the Bank cut its key rate for a second time this year, that there would be no further action until December. While ECB chief economist Philip Lane on Monday affirmed that policymakers “should retain optionality” about a cut in October, hawks on the Governing Council have stressed it “would require a significant shift” to consider what would be back-to-back cuts.