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European Central Bank governing council member Mario Centeno speaks in Lisbon, Portugal, on March 15, 2021.PEDRO NUNES/Reuters

Inflation expectations are anchored to the European Central Bank’s medium-term target even though consumer price rises will be steeper and longer than originally thought, European Central Bank governing council member Mario Centeno said on Tuesday.

“In Europe there is no de-anchored inflation expectations,” Centeno said, adding that “five-year inflation swaps in the euro area are very close to 2 per cent” – the medium term objective for inflation.

He blamed sharp and drawn-out inflation on a “succession of overlapping shocks that have changed the economic context significantly”, impossible to predict one year ago, including Russia’s invasion of Ukraine, which pressured energy and food prices, and supply chain disruptions as a result of China’s zero-COVID policy.

With the bloc’s annual inflation rate running at close to 10 per cent, the ECB has lifted interest rates by a combined 125 basis points over its last two meetings. It is likely to keep on raising rates in the coming months, said Centeno, who is also Portugal’s central bank governor.

Markets have priced in further increases at each of the ECB’s meetings through next spring.

As long as inflation peaks persist, it “won’t be possible to have the desired predictability of monetary policy,” he said. “Therefore, our collective effort, at European level, must be directed to reach the peak of inflation as soon as possible.”

He warned governments against enforcing “pro-cyclical fiscal policies” such as packages to help families and companies to deal with inflation so that the ECB’s monetary and government’s fiscal policies “do not cancel each other out.”