ECB’s de Guindos: To Act If, and When, Our Forward Guidance Conditions Have Been Met

10 February 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos said on Thursday that the timing of ECB policy moves depended on whether and when the conditions of its forward guidance wpuld be met.

In a speech at the London School of Economics German Symposium, de Guindos said that high uncertainty meant the ECB needed ‘more than ever to maintain flexibility and optionality in the conduct of monetary policy. We stand ready to adjust all of our instruments, as appropriate, to ensure that inflation stabilises at our 2% target over the medium term.’

De Guindos then reiterated the conditions of the ECB’s forward guidance and said that the euro area was not at the same point of the business cycle as other jurisdictions.

‘So it’s natural that central banks around the globe won’t necessarily start raising rates at the same time’, he said. ‘We are guided by our forward guidance conditions and will act if, and when, they have been met.’

Although likely to persist at high levels longer than anticipated, inflation would still subside in the course of 2022, he said. ‘That is the central case, but there are upside risks to that outlook’, he said. ‘Inflation could turn out to be higher if price pressures feed through into higher-than-anticipated wage rises, or if the economy returns to full capacity more quickly than foreseen.’

Growth would ‘rebound strongly over the course of 2022’, he said. ‘Over the next three years, we anticipate that euro area growth will remain above its long-term average.’