Pablo Hernandez de Cos, governor of Spain's central bank, said euro zone rate-setters have probably done enough to tame inflation. Photograph: Hollie Adams/BloombergA surge in global borrowing costs, triggered by a sell-off in US Treasuries, means euro zone rate-setters have probably done enough to tame inflation, the governor of Spain’s central bank has said.
Mr Hernández said the rise would strengthen last month’s assessment by the European Central Bank that “keeping the current level of rates for a sufficiently long period will be broadly consistent” with rate-setters hitting their 2 per cent inflation target “in the medium term”.‘I have been chasing a Fitbit refund since April 2022.
Mr Hernández said higher borrowing costs underlined the need for governments to start reducing deficits next year. “Fiscal consolidation should get under way in 2024,” he said. “For these structural reforms and the fiscal consolidation process to succeed, the policy measures need to be of a permanent nature,” he said, stressing that it was “essential that the design, approval and implementation of these measures are all backed by strong political consensus”.
But Mr Hernández, whose six-year term at the Bank of Spain expires next June, said: “Caution is in order.” The ECB’s flexibility to target its PEPP reinvestments more towards the bonds of a particular country provided a welcome “first line of defence” against a sharp divergence, or fragmentation, in borrowing costs between euro zone countries.
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