ECB’s de Guindos: If Economy Normalises, Policy Will Also Normalise

5 July 2021

By David Barwick – FRANKFURT (Econostream) – Policy will return to normal along with the economy, European Central Bank Vice President Luis de Guindos said Monday.

During a Q&A following his speech at the Banking Sector Industry Meeting of IESE Business School, de Guindos said, ‘The central element is the economic recovery … if there is a normalisation of the economic evolution … then there will also be a normalisation of the extraordinary policies taken to counter the pandemic.’

The withdrawal of policy support should be ‘very gradual, very prudent, in line with economic improvement’, he said.

The ECB’s pandemic emergency purchase programme (PEPP) would end ‘in principle’ next March, he said.

De Guindos spoke of ‘a clear improvement of economic prospects’. Pre-pandemic output levels would be reached in the first quarter of next year, ‘two quarters earlier than just a few months ago’, he said.

Inflation, however, was seen remaining ‘below our objective’, even if there was an ongoing discussion about prospects for currently higher price pressures to take on ‘a more permanent character due to second-round effects’.

As before, de Guindos said there had been no wave of bankruptcies yet.