ECB official welcomes inflation rise, but says too soon for rate hike

European Central Bank ( ECB) board member Sabine Lautenschlaeger has said the ECB needs to wait to see if inflation stabilizes in its target zone of just under 2 percent before interest rates can be raised, but that she hopes its bond- buying program can be scaled down before year- end.

Eurozone consumer prices were up by an annual 1.8 percent in January, the highest rate since February 2013, according to a Eurostat estimate, after 1.1 percent in December.

“Has inflation returned just because we’ve had one month of that kind of inflation?” Lautenschlaeger said in an interview with German Deutschlandfunk radio.

“I’m very pleased to say, quite honestly, that we’re close to our target of just under 2 percent. But what’s important for me is that it’s not a temporary, ephemeral outlier on the upside,” the official said.

“For January, we don’t yet know for sure. For December, it was largely due to energy prices and the so- called basis effect ... So it’s really important to ascertain that there is a trend, that the inflation has really returned,” she noted. “So let’s wait a few months so that we can be sure.”

Other data last week showed prices rising in Germany, France and Spain, three of the bloc’s four biggest economies.

But eurozone core inflation, the ECB’s focus, which excludes volatile prices of energy and unprocessed food, was unchanged in January at 0.9 percent.

Lautenschlaeger also said that she was hoping the ECB could “return as quickly as possible to a normalization from the very expansive monetary policies” – its massive bond- buying program.

“If inflation rates continue as they were in January, then I would not want to wait until next year,” she said.

A premature increase in interest rates would be counterproductive and could force the central bank to respond with even stronger measures, she said.