ECB’s de Guindos: ‘Disinflationary Process Is Now Well on Track’
28 October 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Monday said that euro area disinflation was proceeding well, though was subject to considerable risks.
In his introductory remarks at a meeting in Madrid with Spanish business group Hotusa, de Guindos, according to a text provided by the ECB, reiterated the key points of recent ECB communication about restoring price stability ‘in a timely manner’ and ensuring that monetary policy would ‘stay sufficiently restrictive for as long as necessary.’
The ECB was not pre-committing to any path of interest rates and would calibrate policy according to its data-dependent, meeting-by-meeting approach, he said.
Spot inflation rates would increase again in the latter part of this year but then decline to the ECB’s price stability target ‘in the course of next year’, he said. Incoming data indicated that ‘the disinflationary process is now well on track’, he said.
However, there were ‘substantial risks’, he said, citing on the upside geopolitical tensions, extreme weather, and potentially unexpectedly strong wages and profits. At the same time, monetary policy’s impact on demand, global economic deterioration and hesitant consumption and investment all constituted downside risks to inflation, he said.
Labour markets continued to show strength, though there were signs of a slowdown of employment growth and demand for workers, he said.
Higher real incomes and looser financing conditions would support consumption and investment and, flanked by higher exports, lead to stronger growth, he said.
‘However, risks to the growth outlook remain elevated and tilted to the downside’, he said. ‘In particular, lower confidence could prevent consumption and investment from recovering as fast as expected and geopolitical risks continue to pose a threat to the world economy by disrupting energy supplies and global trade.’
‘But euro area growth could be higher if the world economy grows more strongly than expected or if declining inflation and less restrictive monetary policy lead to a faster recovery in consumption and investment’, he said.