Josef Bonnici says ECB must ‘wait’ before touching interest rates, warns on oil impact

Speaking on the margins of the Group of 20 finance ministers meeting in Washington, Malta's Central Bank governor and ECB council member Josef Bonnici told MNI financial news that the ECB "needs to wait and see  how things develop before doing anything on the interest rate front."

Interest rates - Bonnici said - "are not pre-determined," adding that the ECB must adopt a wait-and-see approach: "we have to wait, and  each month the issue comes up and I don't think we decide so far in  advance."

In his comments, Bonnici reportedly echoed the sentiments of fellow Council member Ewald  Nowotny as well as ECB Vice President Vitor Constancio, both of whom also indicated to MNI in Washington that monetary authorities were in no rush to  alter their policy stance.

"We are looking at how things develop in the financial markets and  the extent of the stabilization process that we've seen and which in the  last weeks was obviously somewhat rattled a bit by various events,"  Bonnici said.

"Now there's elections in France and one has to wait a bit on  how that also pans out, but at this stage I don't think there is a big  decision to be taken," he continued.

Spain, he said, "is of course a country to watch because of the reaction of  the financial markets," Bonnici said, but in financial markets  "sometimes there is unnecessary nervousness."

It is too early to be more optimistic about the growth outlook, as data for the first quarter must first be made available, he said. "There is a slowdown, the extent of which is still subject to uncertainty."

"Most of the forecasts seem to think that come the end of the year,  the beginning of next year, the economic situation will be better," he  said. "But of course forecasts are always uncertain themselves, and one has to be a bit more cautious."

"I think it's not a surprise what we are seeing" with regard to inflation, he said. "It's mostly energy-related. And there doesn't seem to be any follow-through, which could make it persistent. So although I  think it's slightly elevated from the 2%" - the threshold of the ECB's  price-stability definition - "the reasons are, I think, clear, and not  therefore of undue concern at this stage."

Oil will boost inflation and simultaneously dampen growth, "so this is not at all a good impact at this stage," he said.