(Bloomberg) -- The European Central Bank must be prudent in bringing interest rates to levels that neither stimulate nor constrain the economy, Governing Council member Mario Centeno said — suggesting officials will take some time before cutting again.

Data will reveal how quickly inflation is retreating and how the economy reacts to looser monetary policy, Centeno told Bloomberg. He refused to be drawn on when the ECB would act next, having lowering its deposit rate from a record 4% last week.

“The natural interest rate in Europe is certainly below the current level of interest rates, so the path forward on the basis of what we know today is clear,” Centeno said on the sidelines of an event in Dubrovnik, Croatia. “When it happens, it will be data-dependent.”

Pledging to abide by that principle hasn’t stopped some policymakers from offering guidance. Recent remarks hint at a pause in July and a good chance of another reduction at the following meeting, in September, when new economic projections will show how the ECB’s efforts to bring inflation back to the target are progressing.

“We’ll have a plateau of inflation until August — because of base effects —  after that it will come down closer to 2%,” Centeno said. “We’ll learn more about how sensitive the economy and inflation are to our rate cuts as we move ahead. So we should continue to be data-dependent. We must be prudent in the months ahead.”

Euro-zone inflation actually quickened in May, while gains in real wages have also picked up. Trends in workers’ pay aren’t a particular concern because “some recovery” is “inevitable,” according to Centeno.

“Without it, real income won’t deliver the levels of consumption that we anticipate on the basis of the most recent forecasts,” he said. “Wages didn’t show any stickiness during the inflationary period, and I don’t see this changing.”

The ECB’s preferred measure of pay accelerated at the start of 2024 — raising questions over whether price pressures were truly under control and allowed for lower rates.

“We expect a gradual recovery, and interest-rate reductions will feed into this process as a stimulus, making sure that both consumption and investment can help preserve the conditions of the labor markets,” Centeno said. Investment, especially, is a “big concern,” he said, “because it’s practically flat at the moment.”

The labor market, on the other hand, is offering reasons for optimism. 

“The creation of new jobs in Europe is at levels we haven’t seen before,” Centeno said. “This has and will feed into productivity.”

He sees similarities between Europe’s jobs market and that of the US.

“That’s because we seem to have finally understood that migration and mobility are key for us,” Centeno said. “Half of the jobs that were created since Covid are filled with workers not working in the country they were born.”

©2024 Bloomberg L.P.