ECB’s de Guindos: Real Economy Has Yet to Reflect Full Effects of Policy Tightening

22 November 2023

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Wednesday said that the monetary policy transmission process was not yet fully completed.

In an interview with Bloomberg TV, he said that ‘in terms of the macroeconomic impact, I think that there are some effects that have to be reflected yet in the evolution of the real economy.’

The discussion about interest rate cuts was precipitated, he said. 

‘I think it’s premature to talk about that’, he said. ‘We have increased interest rates 10 times, we have kept rates on hold, we will continue with the discontinuation of the reinvestments of APP portfolio, let’s see what happens with PEPP.’

Asked about the market’s reaction, he said that ‘the outlook that markets are taking with respect to the evolution of the economy, I would say that it’s a little bit sanguine and optimistic. And there is a little bit of wishful thinking, if you allow me to say.’

Fiscal policy had an impact on inflation, he said, and the lack of agreement on the subject could lead to uncertainty and ‘affect the perception of markets with respect to fiscal sustainability over the medium term.’

‘At the end of the day, monetary and fiscal interact and give rise to the policy mix and the policy mix has to be very well for the reduction of inflation’, he said.