De Guindos urges prudence on rate hikes amid growth concerns
ECB Vice-President Luis de Guindos called for prudence on future interest rate decisions, citing concerns about slowing growth and the impact of the latest energy price shock. He emphasized the need to await new data and projections in June.
De Guindos urges caution on June rate move
ECB Vice-President Luis de Guindos advocated for prudence regarding the next interest rate decision, emphasizing the need for more clarity on the conflict in Iran and upcoming growth data.
He noted that an energy shock impacts inflation faster than growth, suggesting weaker activity will become visible in the coming weeks.
De Guindos differentiated the current energy shock from 2021-22, highlighting positive interest rates, quantitative tightening, and a different fiscal policy stance now.
He also reflected on past delays in action, attributing them to excessive academic debate on inflation drivers, stressing that central banks must make timely decisions.
Fiscal risks and institutional unity
De Guindos expressed concern over limited fiscal space in the euro area, especially with increased defense spending and declining growth, warning that markets might eventually pay more attention to sovereign debt risks.
He clarified this refers to potential yield increases and widening spreads, which would tighten financing conditions.
The Vice-President also underscored the critical importance of a united Governing Council, contrasting it with the deep divisions seen in 2019.
He praised President Lagarde's consensual style, arguing that occasional delays for unity are a price worth paying for institutional cohesion.
Beyond dogma: adapting to reality
De Guindos urges central bankers to move beyond dogma, prioritizing real-world judgment over 'ivory tower' models.
He stresses Germany's urgent need for structural reforms, including banking consolidation, and criticizes national resistance to cross-border mergers.
Spain's growth, driven by reforms and immigration, still faces low productivity and severe rental market pressures.
Source: Luis de Guindos: Interview with Financial Times
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