European Central Bank Governing Council member Yannis Stournaras said governments must do their part in reining in consumer prices after borrowing costs reached a level that may well be their peak.
“Monetary policy has done its part to fight inflation,” Stournaras said in an interview in Santiago de Compostela, Spain, where he attended a meeting of euro-area finance officials. “Now it’s up to fiscal policy to take out some of the heat.”
The comments follow a similar call from French central bank governor Francois Villeroy de Galhau, who urged a “more appropriate policy mix” on Friday. ECB President Christine Lagarde also reiterated that governments should roll back aid measures related to the energy crisis sparked by Russia’s war in Ukraine.
In addition to helping the fight against inflation, a tighter approach to public finances would have other benefits, Stournaras said.
“A more restrictive fiscal stance wouldn’t only be a welcome strategic complement to ECB policy but also help improve the credibility of public debt and loosen the nexus with banks,” he said. “There are synergies that should be reaped.”
The ECB’s decision to raise borrowing costs on Thursday was much debated in advance and ultimately opposed by some members of the central bank’s Governing Council. Stournaras said that at least his initial choice was to keep rates steady.
“I would have preferred to hold rates last week,” he said. “But there were arguments in favor of both outcomes — hiking and holding — so I’m fine with the decision we took.”
