ECB’s de Guindos: ‘Need to Move Gradually and Cautiously as We Normalise’
19 May 2022
By David Barwick – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Thursday said that the normalisation of monetary policy had to proceed ‘gradually and cautiously’.
Speaking at a symposium, de Guindos said that expectations remained anchored, but ‘[t]hat said, we are closely monitoring for second-round effects, notably wage-setting behaviour. We need to prevent the scenario where the high inflation that we currently see becomes entrenched in expectations.’
However, he quickly shifted to avoiding sounding too hawkish, affirming that the ‘exceptional degree of uncertainty’ meant that ‘we need to move gradually and cautiously as we normalise our monetary policy.’
As to the end of net asset purchases, ‘I would expect this to happen earlier in the third quarter rather than later’, he said. ‘A first interest rate hike could take place some time after that, depending on our evolving assessment of the outlook.’
‘Our June staff projections will put us in a better position to appraise where the euro area economy is heading’, he added. ‘We need to observe the impact that shifts in financing conditions and the erosion of purchasing power are having on activity and inflation dynamics.’