ECB’s de Guindos: Widespread Vaccination by 3Q To Give Rise to Economic Rebound

5 February 2021

By David Barwick – FRANKFURT (Econostream) – The vaccination of Europe’s citizens should fuel the economic rebound from the third quarter of this year, European Central Bank Vice President Luis de Guindos said Friday.

Speaking at the German Symposium of the LSE, de Guindos said that the ECB had ‘not met our definition of price stability over the last ten years’, pointing to global long-term developments as a principal reason for this.

‘Let’s see what happens over time … over the next 2-3 years, inflation is going to be clearly below our projection’, he said. ‘This is a source of concern for us.’

‘We do not believe that we are going to see … an important increase in inflation over the next quarters’, he said. However, the impact of structural factors that have depressed inflation in the past may, partly because, of the pandemic, diminish, he said.

De Guindos attributed January’s ‘important increase’ in European inflation to one-off factors. As to the growth outlook, this depended on the pandemic, he said, with the rollout of vaccines a positive factor whose impact is yet to come.

The ECB does not closely follow each country’s individual progress in vaccinating its people, he said. Presumably their respective progress would ‘converge’ over time, he said.

‘Perhaps in the third quarter of the year … an important percentage of the population could be vaccinated’, giving rise to an economic rebound, he said.

Still, in the current quarter, ‘growth will be a little bit weaker than expected’ as a consequence of the pandemic’s resurgence, he said.

The fourth quarter of last year ‘was a little bit better than our forecasts’, evidence that ‘the economy is adjusting to the containment measures’, he said.

De Guindos roundly rejected calls for the cancellation of sovereign debt held by the ECB, calling the debate ‘detrimental’. The inadvisability of debt cancellation is only secondarily because such a move would be less beneficial financially than its advocates imagine, he said. Rather, it is a question of the central bank’s ‘reputation, credibility and independence’, he said.

Macroprudential policies ‘could be a very important’ aspect of monetary policy, given the latter’s side effects, he said in other comments.