Pablo Hernández de Cos: Latest monetary policy developments in the euro area

Speech by Mr Pablo Hernández de Cos, Governor of the Bank of Spain, at an event, organised by Consejo Empresarial Alianza por Iberoamérica (CEAPI), Madrid, 15 February 2023.

Ladies and gentlemen, let me begin by thanking Consejo Empresarial Alianza por Iberoamérica for inviting me to address you all. Today I will focus on recent and future monetary policy developments in the euro area. In the first part of my address, I will explain the rationale behind the monetary policy decisions that we adopted in our European Central Bank (ECB) Governing Council meeting earlier this month. In the second part, I will lay out a number of factors that will require close monitoring going forward.

Our February monetary policy decisions

In order to explain the rationale behind our February decisions, it is useful to first go back to our decisions and communication at our December monetary policy meeting. As you may recall, in that meeting we raised our key interest rates by 50 bp. More importantly for the purpose of my address today, we also announced that interest rates would still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target.