European Central Bank's De Guindos: The European Central Bank should not rush to raise interest rates again.

The European Central Bank (ECB) Executive Board member and Governor of the Central Bank of Malta, Alexander Demarco, stated that due to the faster than expected decline in oil prices, the ECB should not hastily introduce a new round of interest rate hikes. More and more policymakers are also calling for monetary policy to remain cautious, a view with which he agrees. The ECB completed an interest rate hike in June, and previously the bank's own economic forecasting model had assumed further tightening of monetary policy. However, in recent weeks the rapid decline in energy prices has provided more evidence to postpone a second interest rate hike. Demarco, speaking at the ECB Central Bank Forum, said in an interview, "In an environment where inflationary pressures are gradually easing, it is not appropriate to rush into implementing policy adjustments." He stated that the low energy costs will quickly alleviate market inflation expectations and suppress demands for wage increases. Despite inflation rates temporarily rising above 3%, well above the ECB's 2% inflation target, actual wage growth remains positive. Demarco stated that the only suitable situation for increasing interest rates ahead of schedule would be if indirect inflation or a second round of inflation effects exceed expectations, inflation expectations become unanchored, or demands for wage increases continue to rise.