ECB’s de Guindos: Need to Do More to Ensure Sustainable Price Stability
10 January 2024
By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Tuesday said that it was necessary to do more to achieve the ECB’s price stability objective.
In a speech during the 14th Spain Investors Day in Madrid, a text of which was published to the website of the ECB, de Guindos said that despite progress in reducing inflation, ‘more needs to be done to ensure a timely and sustainable return of inflation to our 2% medium-term target.’
The disinflationary process had ‘gained momentum’, he said, but he also warned that ‘the rapid pace of disinflation that we observed in 2023 is likely to slow down in 2024, and to pause temporarily at the beginning of the year, as was the case in December 2023.’
With indicators pointing to an economic contraction in December, a technical recession in the second half of 2023 was not off the table, he said.
The next steps on the inflation trajectory were unclear, he said, especially due to wage pressures and geopolitical tensions.
‘[T]he incoming data indicate that the future remains uncertain, and the prospects tilted to the downside’, he said.
Data would continue to dictate the ECB’s decisions on the level and duration of restriction, he said, repeating the assessment that the ‘current level of interest rates, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to our target.’
He welcomed the agreement that was recently reached on the EU's governance framework, calling it a ‘powerful signal to markets as it reduces uncertainty about fiscal rules in the EU’ that it was crucial be 'implemented properly and without delay.’
Structural reforms and investments to enhance the euro area’s supply capacity were measures that could contribute to the reduction of price pressures in the medium term, he said.
‘In this context, sustainable and investment-oriented fiscal policies aimed at promoting the energy transition, strengthening the resilience of supply chains and increasing euro area productivity are supportive of our price stability goal’, he said.