MILAN (Reuters) -The euro zone economy is weak and needs “further stimulus” from the European Central Bank, ECB policymaker Mario Centeno said in an interview with the Italian daily La Stampa published on Sunday.
The ECB cut interest rates for the eighth time in a year earlier this month to support a sluggish recovery in the euro zone but clearly signalled a pause in July.
Centeno, whose term as Portugal’s central bank governor ends before the ECB’s next policy meeting on July 23-24, backed further rate cuts.
“The level of rates must be compatible with an economy that generates stable inflation at 2%. Today, in my opinion, that economy does not yet exist in the euro area,” he told La Stampa.
“Supply and demand conditions are still too weak to allow a return to the target without further stimulus,” added Centeno, who often favours easier monetary policy conditions.
“It’s a decision that will be taken meeting by meeting. But it is essential to remember that, for the idea of a neutral rate to work, the price level and the state of the economy must be in balance. And today, the economy remains weak,” he said.
(Reporting by Gianluca Semeraro; Editing by Hugh Lawson)
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