Globalisation and immigration have helped restrain wages and boost labour market flexibility, but the European Central Bank cannot be complacent on inflation, Governing Council member Miguel Angel Fernandez Ordonez said on Sunday.
Ordonez, speaking at a conference hosted by the Kiel-based Institute for the World Economy in northern Germany, also said the ECB's monetary policy stance was accommodative and had been so for much of the ECB's history.
"In the ECB Governing Council, we're proud that we've been able to continue anchoring inflation expectations. But there is no room for complacency. The recent inflation success story needs continual support," he said. While the macroeconomic environment was "quite bright", Ordonez said public support for low inflation could weaken if the economy soured.
The ECB is widely expected to raise interest rates by a quarter point to a near six-year high of 4 percent on Wednesday, and two thirds of analysts polled by Reuters expect a further rise to 4.25 percent by September. Many also expect the ECB to cease describing its policy stance as accommodative.
Globalisation had helped keep down consumer price inflation by putting pressure on wages in Europe, and Ordonez said that in his native Spain in particular, immigration had boosted labour market flexibility. But though high levels of immigration were not about to cease, nor would they last forever and should not be used as an excuse to avoid job market reform, added Ordonez, who heads the Bank of Spain.
"I'm worried that beneficial effects of immigration may reduce the political will for labour market reform ... and leave the impression that the labour market is more efficient than it really is. There is a risk politicians can become complacent."