The ECB raised its main interest rate by a record 75 basis points in September as euro zone inflation accelerated to 10% that month, mainly spurred by soaring energy prices as a consequence of Russia's invasion of Ukraine.
"The normalisation of monetary policy is absolutely necessary and desirable in the European context ... at the same time monetary policy decisions must be gradual and guided by flexibility and proportionality," Centeno told an event in Lisbon.
He warned that the costs of an "aggressive monetary policy" could outweigh the benefits and that the effectiveness of monetary policy was limited in the face of supply shocks such as energy market disruptions and shortages of raw materials, requiring prudence.
"A decision maker cannot himself become a factor of instability ... and it will be worse if the decisions have to be reversed shortly afterwards, affecting the credibility, in particular of central banks," Centeno said.
On the other hand, if there were signs of de-anchoring inflation expectations, and second-round effects, such as on wages, they would require decisions to avoid a combination of high inflation and high interest rates.
Centeno said that, in that case, the costs of acting too late would be clearly higher, and so it was important to keep inflation and price volatility limited to certain categories of goods and services.
(Reporting by Sergio Goncalves, editing by Andrei Khalip, Robert Birsel)
By Sergio Goncalves
