The European Central Bank (ECB) is facing a challenging balancing act in 2024 as it tries to prevent inflation while also stimulating the slowing EU economy. The Euro has returned to 2024 lows against the Pound, largely due to poor economic data and the pressure on the ECB to cut rates. The US dollar has remained strong, but the Euro has weakened. ECB board member Isabel Schnabel has warned about persistent inflation and the need to contain second-round effects. The EU economy, particularly Germany, has been stagnant, and the ECB's restrictive rate policy has contributed to the weak data. As inflation comes under control, pressure may mount for the ECB to ease rates. In an interview with Naftemporiki, Luis de Guindos, Vice-President of the ECB, discussed the current state of the European economy and the potential for interest rate cuts [d925deb8] [1c8a664a] [af1930d7].
De Guindos noted that while inflation has been declining and the German economy has been slowing, services inflation remains sticky and the labor market is still tight. He suggested that the combination of high wage growth and low productivity could lead to a significant increase in unit labor costs, particularly in services inflation. De Guindos emphasized the importance of waiting for more information on wage bargaining agreements before making a decision on interest rates in June. He also highlighted that the ECB's monetary policy is data-dependent and rates will be adjusted based on the data they see. De Guindos did not see a risk of inflation falling below the 2% target and stated that the ECB will use quantitative easing if necessary. He asserted that the ECB acts independently of the Federal Reserve and does not target the exchange rate. Regarding the digital euro, De Guindos explained that it would be an extension of the physical euro and would not replace physical notes or compete with bank accounts. He described Greece as outperforming the rest of the euro area and commended the progress made by Greek banks in improving their position. However, he emphasized the need for Greece to continue reducing its public debt ratio and for Greek banks to clean up their balance sheets. Overall, De Guindos believes Greece is on the right path [af1930d7].
In a recent interview with Le Monde, Luis de Guindos, Vice President of the European Central Bank (ECB), discussed various topics related to the European economy and monetary policy. He mentioned that progress has been made in reducing inflation in the euro area, but the battle is not over. Guindos expects the ECB to reach its 2% inflation target by 2025. He also highlighted the need for wages to rise to make up for lost purchasing power, but stressed the importance of improving productivity. Guindos indicated that if current trends continue, the ECB will loosen its monetary policy stance in June. However, the timing of further interest rate cuts will depend on various factors, including data evolution, geopolitical situation, and the impact on oil prices. Guindos expressed concerns about the European economy's lower growth compared to the United States, attributing it to lower productivity. He acknowledged the threat from fiscal stance and increased debt levels in European countries, but believes that the new fiscal rules are more balanced and prudent. Guindos also mentioned the risk posed by China's economic growth concerns and the need for vigilance. He expressed concerns about the economic consequences of the crisis in the Middle East, particularly in relation to oil prices and geopolitical risks. Guindos criticized the lack of progress in European integration, specifically mentioning the need for a capital markets union and a common fiscal capacity for the Economic and Monetary Union. He hopes for fresh impetus in these areas after the European elections and the arrival of a new European Commission [4905ebf7].