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The Vice President of the European Central Bank, Luis de Guindos, at the inauguration of the 15th edition of the Spain Investors Day. Efe
Guindos Confirms ECB Will Continue to Lower Rates Despite Eurozone 'Losing Momentum'

Guindos Confirms ECB Will Continue to Lower Rates Despite Eurozone 'Losing Momentum'

The Vice President of the European Central Bank warns that concerns over controlling inflation have led to low growth.

Ep

Miércoles, 15 de enero 2025, 10:40

The European Central Bank (ECB) will continue to further ease monetary policy restrictions if incoming data confirms its baseline scenario, according to the institution's Vice President, Luis de Guindos. He stated that the disinflation process is 'well on track' and that concerns over price increases have shifted focus to the low growth in the eurozone.

In a speech delivered in Madrid during the 15th edition of the Spain Investors Day, the former Economy Minister highlighted the 'substantial progress' made towards returning inflation to the 2% target, following the ECB's four interest rate cuts since last June, totalling 100 basis points.

'The good news is that the disinflation process is well on track,' summarised Guindos, noting that in 2024 the average inflation rate was 2.4%. Most core inflation indicators suggest a stabilisation near the medium-term target in a sustained manner. Despite high service inflation due to wage impacts, wage growth has also moderated.

However, the ECB Vice President warned that the outlook for the eurozone economy 'remains weak' and subject to significant uncertainty. In fact, the latest information suggests that the economy is 'losing momentum', although the labour market remains resilient.

'The balance of macroeconomic risks has shifted from concerns over high inflation to concerns over low growth,' explained Guindos, adding that the outlook is clouded by even greater uncertainty, driven by potential global trade frictions, macroeconomic fragmentation, geopolitical tensions, and concerns over fiscal policy in the eurozone.

Looking ahead, the Spaniard believes conditions are in place for growth to strengthen over the projection horizon, albeit less than previously anticipated. He expects that as wage recovery continues and inflation falls, the increase in real wages should lead to higher household spending.

Furthermore, if trade tensions do not escalate, exports should also support the recovery as global demand increases.

Thus, following the 25 basis point rate cut agreed in December, the ECB Vice President indicated that if upcoming data confirms the institution's baseline, 'the monetary policy trajectory is clear, and we expect to continue further reducing its restrictive nature.'

In any case, Guindos reiterated that the high level of uncertainty demands caution, so the ECB does not commit in advance to a specific rate path and will continue to apply a data-driven, meeting-by-meeting approach to determine the appropriate monetary policy stance.

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todoalicante Guindos Confirms ECB Will Continue to Lower Rates Despite Eurozone 'Losing Momentum'