ECB’s de Guindos: Convinced Monetary Policy Stance Can Change in June

14 March 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Thursday said that ECB wanted to have more information before changing its monetary policy stance and that data available in June would make a change possible.

In a fireside chat at Foros de Vanguardia in Barcelona, Spain, de Guindos said, ‘We are convinced that by June we will have enough information. We will have a higher level of information, among other factors, because there are many collective agreements that are signed in the first months of each year, and obviously in June we will have the most complete image and, in this case, we will be able to make decisions regarding the modification of monetary policy.’

The ECB decided to keep interest rates unchanged at the last Governing Council meeting to accumulate more information regarding the evolution of the labour market, of salaries and of productivity, he said.

Inflation developments had been positive, he said, but the ECB still needed more confidence in the disinflation process.

‘We hope that it will continue to decelerate, but we need to be convinced that inflation converges stably towards the 2% objective and that is why what happens in the labour market is very important.’

The main point of attention was unit labour costs, which had a strong impact on services, he said. ‘We are seeing that if these unit labour costs are not partially absorbed by the evolution of profits, then inflationary tension may occur.’

Asked about the possibility of a first interest rate cut in April, he said, ‘We will have two Governing Council meetings, one in April and the other in June and I will repeat, I am convinced that in June we will have much more information.’

‘What is the reason for waiting until June? The reason for waiting until June is fundamentally the whole closure of the collective agreements that will be concentrated in a very clear way in the first months of the year’, he continued.

From the perspective of monetary policy implementation, there was not a big difference between starting to cut rates in April or in June, he said. ‘In monetary policy, the adjustment is fine.’