Guindos (ECB) assures that it is "premature" to talk about lowering rates

MADRID, 21 Dic.

Guindos (ECB) assures that it is "premature" to talk about lowering rates


The vice president of the European Central Bank (ECB), Luis de Guindos, has highlighted the slowdown in the inflation rate of the euro zone, as reflected by the latest "positive" data, although these are not enough to change the course of monetary policy , so "it is premature to talk about a rate cut."

"When we see that inflation is clearly converging in a stable manner towards our objective of 2%, then monetary policy will be able to begin to modify its sign. But it is still early for that," underlines the Spanish economist in an interview with '20 minutes'. ', collected by Europa Press.

The vice president of the ECB defends that current interest rates, if maintained over time, will allow inflation to head towards 2%, although he has reiterated the 'guardian of the euro' mantra of being dependent on data.

"These have been positive, but still not enough to modify monetary policy. Therefore, it is premature to talk about a rate cut," he warns.

In this sense, although there is a clear slowdown in inflation because the supply and energy components that had a negative impact have begun to disappear and because monetary policy is working, in the euro zone salaries are growing on average above 5% , but productivity is barely improving, which means that unit labor costs are increasing and increases inflationary tensions.

Thus, while in 2022 business margins increased a lot, this year the increase is more moderate, to a certain extent because companies are absorbing part of the increase in labor costs, contributing to a moderate evolution of inflation, although Guindos warns that these factors could delay the evolution of inflation towards the 2% objective. "We are following it very closely," he adds.

Regarding the evolution of economic activity in the euro zone, the vice president of the ECB recalls that the institution "does not foresee a technical recession", pointing out that the main problem is that the European economy has a structural problem in growing, as reflected in the projections from the ECB and the European Commission, which predict a very moderate expansion, around 1% until 2026.

"This potential growth is low because productivity barely increases. Europe must import more energy than other economies in the world and, therefore, the energy crisis further aggravates these competitiveness problems," explains the Spanish economist, for whom, in this context , structural reforms are necessary.

"The objective of monetary policy is to reduce inflation, but to grow, other agents must come into play," says Guindos, adding the importance of completing the Banking Union, as well as advancing the capital market union and the internal market of the European Union.