The Governor of the Bank of Portugal warned that in January and February, inflation is expected to reach its peak, after a slight drop in November. ECB interest rates are not expected to exceed 3.5%.
Inflation fell slightly from October to November, and is expected to fall again in December, but is expected to reach its peak in the beginning of next year. In an interview with RTP, Mário Centeno explained that in January and February, Portugal is expected to reach the peak of inflation.
“Inflation in the Euro area exceeded 10% in October. It fell slightly in November, which is the first good news. It is expected to fall again in December. Then, in January and February, some very characteristic effects of contract updates – which are usually done looking back, using past inflation – may lead to a slight increase in inflation,” explained the Governor of the Bank of Portugal. He added: “It is from this moment that all monetary policy will become more predictable, that the ECB can, more closely, make decisions that are more predictable and that is what we need most at this moment.”
Mentioning several times that “it is possible” that inflation will rise again in January 2023, Mário Centeno explained, however, that the decrease in inflation between October and November “was precisely observed by the energy component, although it is currently very high.”
Given this scenario, which is of predictability – without major changes caused by the war in Ukraine – the reference rate of the European Central Bank (interest rates) is not expected to exceed 3.5%. “Then, we should expect that, at a certain point, this rate will converge to 2%,” added Centeno.
Mário Centeno also spoke about the book “The Governor”, which is a testimony by Carlos Costa, Governor of the Bank of Portugal between 2010 and 2020. In the book released in November, it is indicated that Centeno – who was Minister of Finance at the time when problems arose at Banif – spent several days negotiating the sale of Banif to Santander, without Carlos Costa being informed. “This is either a calumny or a nonsense. As we are close to Christmas, we will just say it is a nonsense,” Centeno told RTP. “Everything written in those two paragraphs is false,” he added.
