ECB’s de Guindos: Confidence in 2% Inflation at the End of 2025 Key for Rate Cuts

23 July 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Tuesday said that the most important element for the ECB in deciding on further rate cuts was confidence about the restoration of price stability at the end of next year.

In an interview with Spanish news agency Europa Press, de Guindos said, ‘The current level of uncertainty is huge, so we have to be prudent when taking decisions. When we say that we want to have more confidence, we mean more confidence that at the end of 2025 inflation will be at our definition of price stability, which is an inflation rate of 2% over the medium term. That’s the key question.’

The Governing Council decided to keep interest rates unchanged at the July meeting and wait until September, when more information would be available, to reassess its monetary policy stance, he said.

‘Data-wise, September is a much more convenient month for taking decisions than July was’, he said.

The ECB would continue to look at all incoming data, especially related to services, he said. '[T]he new macroeconomic projections will be the most important’ part of assessing convergence towards the 2% inflation target.

All measures of underlying inflation were decelerating, and wages had also started to slow down, he said.

‘And if wage increases moderate, services inflation – which is most sensitive to wage developments – will moderate too, and that will enable us to reach our 2% inflation target at the end of next year’, he said.

The political uncertainty in Europe called for ‘more cautious and prudent decision-making’, he said.

Asked about the fiscal situation in France, he avoided specifics, saying that it was ‘very important that all countries respect and implement the fiscal framework we have given ourselves in Europe.’