ECB Insight: de Guindos Now Much More Cautious, Clearly Less Encouraging of Another Rate Cut

3 April 2025

By David Barwick – FRANKFURT (Econostream) – Looking at European Central Bank Vice President Luis de Guindos’ latest comments alongside those made by him previously, it is hard to escape the conclusion that he has grown suddenly less supportive of further monetary policy easing in the near term.

In his speech Thursday morning to the International Federation of Accountants’ Chief Executives Forum, de Guindos was fairly explicit in identifying the risen uncertainty as ground for policymakers to practice particular caution.

‘In terms of monetary policy, this uncertainty means we need to be extremely prudent when determining the appropriate stance’, he said in perhaps his most notable comment of the intervention. ‘While most indicators point to inflation moving in the right direction, the environment of exceptional uncertainty requires us to stick even more closely to our data-dependent and meeting-by-meeting approach.’

The contrast with his previous tone, most notably in his interview with Ireland’s The Sunday Times published on 16 March, is clear. Then, it was not 'most' but 'all' indicators supporting confidence on the inflation front.

And while much of that interview also dealt with the extreme uncertainty, which of course did not emerge only yesterday evening, this factor did not in the least impede de Guindos’ optimism at the time.

‘[W]e need to keep in mind that factors like tariffs and fiscal policy are causing a lot of uncertainty’, he said then. ‘But taking this into account, we are confident that headline inflation will converge on a sustainable basis towards our 2% medium-term target towards the end of this year or the beginning of next.’

There was none of that today.

While sticking to his – and many others’ – previous characterisation of the disinflation process as on track, with a return to price stability indicated, this Thursday morning he was full of caveats and warnings related precisely to the same uncertainty that had hardly seemed to matter two short weeks ago.

‘But uncertainty surrounding the inflation outlook remains high, mainly on account of increasing friction in global trade’, he said today. ‘An escalation in trade tensions could see the euro depreciate and import costs rise, while much needed defence and infrastructure spending could raise inflation via aggregate demand.’

Previously, de Guindos had seemed to consider recent fiscal decisions in Europe scarcely material, in obvious contrast to his tone now.

Geopolitical tensions as well could produce price pressures, he said today.

To be sure, de Guindos did not ignore the inflation-depressing potential of dampened growth, but this factor had clearly been demoted, given that today weak growth was by no means framed as the antidote to the inflationary impact of trade tensions.

Two weeks ago, it was; at that time, trade tensions ‘would have a much worse impact on growth than on inflation’, he asserted. ‘This is because increasing tariffs raises prices at first, but lower growth subsequently offsets this initial price increase.’

The first public comments by a Governing Council member since the new US presidential administration unveiled its contribution to protectionism offer little reason to think that things are as they were a mere 24 hours ago.

In our last member-by-member review of the Governing Counil, we had felt confident about putting De Guindos in the camp of those inclined to cut interest rates again on 17 April, but based on his significantly gloomier remarks on Thursday, no longer see such a classification as justified.

In particular, the comment that policymakers ‘need to be extremely prudent when determining the appropriate stance’ suggests to our mind that de Guindos is currently disposed to stand pat two weeks from today, though of course that could change and in general the situation remains fluid.