ECB’s de Guindos: Disinflation ‘Well on Track’, Fine-Tuning Monetary Policy ‘Complex’

6 November 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Wednesday said that euro area disinflation was proceeding well and that fine-tuning monetary policy was difficult.

In a speech at a seminar hosted by the University of London, de Guindos, according to a text provided by the ECB, said that the latest data ‘reinforce the signs that price pressures have weakened and that the disinflation process is well on track.’

‘The inflation outlook is also affected by recent downside surprises indicators of economic activity, while financing conditions remain restrictive’, he said. ‘Fine-tuning monetary policy decisions is complex but the medium-term orientation of inflation is clear.’

The ECB would base its decisions on the usual three pillars and continuing to follow a data-dependent, meeting-by-meeting approach excluding precommitments, he said.

Inflation would mount again in the next months largely on base effects before then subsiding to the ECB’s price stability target ‘over the course of next year’ in the wake of reduced labour costs and the impact of previous rate hikes, he said.

Recent economic indicators had pointed to weaker growth than envisioned in September by the ECB, he said.

High savings linked to weak consumption was driven by factors that would weaken during 2025, he said.

‘Price and wage adjustments should also play a powerful role in reviving consumption’, he continued. The weaker consumption of the past three years was in good measure a reflection of reduced purchases of food and energy, he said.

‘However, with food and energy inflation moderating and purchasing power increasing, spending should start to respond’, he said. ‘And there are already indications that the consumption of goods increased over the summer, with a small uptick in retail trade in August.’