Minister for Finance Michael McGrath said the European Central Bank should be cautious of the impact on firms and households of raising interest rates, and called on businesses to play their part in fighting inflation by cutting prices.
“The monetary authorities have very difficult decisions to make in relation to interest-rate policies,” Mr McGrath said on Saturday, as he arrived for a second day of meetings outside Stockholm between finance ministers and ECB officials including president Christine Lagarde.
“As well as the broader economic context, they do also have to take into account the real life impact on people of the decisions that are made,” he added.
While Mr McGrath said he isn’t seeking to tell the ECB what to do, it is unusual for finance ministers to offer even thinly veiled commentary on monetary policy.
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Analysts expect the ECB may ease the pace of interest-rate increases at a meeting on Thursday as they wait to see the impact of 350 basis points of tightening since last July.
In Ireland, Mr McGrath said there are negative effects of continuing to raise rates, particularly for the poorest households, as they face rising mortgage costs, and for some businesses that have floating-rate debt instruments.
He urged companies to pass falling expenses onto consumers through price cuts in order to help tame inflation and relieve pressure on the ECB to continue hikes.
“If that does not happen, then the burden of getting inflation down falls entirely on monetary policy,” Mr McGrath said. “We know what that means for people and businesses by way of interest rates going higher and higher.” --Bloomberg
