Luis de Guindos, the vice president of the European Central Bank (ECB), has assured today that the supervisory body is “prepared” to cut interest rates in June 2024. Thus, he qualifies the words of the president of the ECB , Christine Lagarde, after the last monetary policy meeting. However, Guindos has indicated that this measure would be taken if inflation continues on its moderate path during the coming months.
De Guindos presented today to the European Parliament – the group of deputies of the European Union – the annual report of the issuing institute, and has indicated that inflation will remain at current levels – it closed in March with a rate of 2.4% – , in the coming months. However, he has predicted that he will reach the goal of 2% during next year 2025.
“Inflation has fallen more this year and we expect it to continue falling in the medium term, but at a slower pace,” he advanced in his initial speech, in which he also defended that it will be “appropriate” to relax the current restrictive monetary policy if provide the appropriate conditions.
“If our updated inflation analysis, underlying inflation dynamics and the strength of monetary policy transmission will increase our confidence that inflation is converging towards our target in a sustainable manner, it would be appropriate to reduce the current level of monetary tightening. “he remarked.
Inflation closed in March with an interannual rate of 2.4%, two tenths less than the previous month, while core inflation – which excludes energy, food and tobacco and is the reference for the European Central Bank (ECB) – also fell two tenths, to 2.9%.
The eurozone thus chained three months with decreases in its average inflation rate since it experienced a rise of five tenths in December 2023, rising to 2.9%. Since then, the price increase was 2.8% in January, 2.6% in February and 2.4% in March.
“We have been quite clear. If things continue to evolve as they have lately, in June we will be ready”
“With regard to monetary policy, we have been quite clear. If things continue to evolve as they have done lately, in June we will be prepared to reduce the restriction of our monetary policy,” De Guindos told MEPs of the Political Affairs Committee. Economics of the European Parliament.
Risks and economic uncertainty
However, De Guindos has pointed out that there are a series of “risks” that could modify this downward trend, among which he cited wage increases, unit labor costs, business margins and geopolitical risks.
“With respect to the future, taking into account the level of uncertainty we have in the economic scenario, I think we have been very clear that we must continue to depend on the data meeting after meeting (of the ECB). It is very difficult to give an orientation towards the future, but in June we have very clear ideas about what we have to do,” he explained.
In any case, the vice president of the ECB has defended that interest rates are currently “at levels that provide a substantial contribution to the disinflation process underway”, while reiterating that they will remain in restrictive territory “as long as necessary.” .
During the last meeting, held on April 11, the ECB decided to maintain the reference interest rate at 4.50%, its highest level since 2001, after raising it ten times between July 2022 and September 2023. sometimes in a range of between 0.25 and 0.75 points.
