The slogan is to cancel all effects that put pressure on prices.

Banco de Portugal’s governor said on Monday that the slogan for now is to cancel all effects that could put pressure on prices, including on workers’ wages and company profits.

“Today, the slogan for the entire economy is mitigation, the elimination of all effects that can put pressure on prices,” said Mario Centeno in a speech at a dinner hosted by the Hotel Association of Portugal (AHP) at a hotel in Lisbon. .

Centeno said there are now signs that inflationary pressures may be easing, especially for commodities and energy commodities, as prices for most of these commodities are lower than a year ago.

However, there are other factors that still affect inflation, wages and corporate profits.

Centeno said that at the outset, increases in wages or profit margins may appear to have benefits (for workers and for shareholders, respectively), but in the medium term they make things worse because they cause inflation and imply that central banks are taking steps to combat them ( by raising interest rates).

“A one percentage point increase, whether in wages or profit margins, puts pressure on inflation, which in turn puts pressure on central bank decisions. In the short term, it looks like we’re all winning – we [banco central] we contribute because we raise the interest rate, companies and employees get another percentage point in margins or wages, but the truth is that in the medium term we will lose everyone,” he said.

For Centeno, it is necessary to combat this “almost short-sighted” behavior of the economy, with “an apparent lack of coordination”, for which “the slogan of the whole economy is to soften, to nullify all effects that can put pressure on prices.”

Centeno said that central banks “love to talk about wages and that the pass-through of inflation to wages needs to be curbed”, believing that “they are right” that inflationary spirals must be avoided at the expense of costs.

However, he recalled that “decisions made by companies regarding the size of profits equally affect” prices, so these two parameters should be put on the same level.

On interest rates, Centeno said that “they have risen too fast” than they would in the normal scenario, but that the ECB was “forced to do so” by the externality of the inflation surge, and that even so, interest rates in reals continue to remain extremely negative, despite the negative impact of rising interest rates on holders of debt obligations (mainly bank loans).

This was the first time the governor of Banco de Portugal had made a speech since the recent banking crisis, saying that recent developments in the European banking system were encouraging, but that the central bank would continue to closely monitor developments and risks associated with banks and Portugal. .

After tense negotiations over the weekend, Swiss UBS agreed on Sunday to buy its rival Credit Suisse at a low price, with substantial guarantees from the government in Bern and liquidity from the country’s central bank (BNS).

In the United States, a Silicon Valley bank failed and the authorities guaranteed all deposits for fear that other banks of considerable size might be called into question.

The ECB supervisory board held two emergency meetings last week. On Monday, the ECB president said financial stability was sufficient to counter the “stress” caused by the US banking crash and the collapse of the Credit Suisse stock market.