In a recent statement during Frankfurt's Euro Finance Week, the European Central Bank's (ECB) Vice President Luis de Guindos highlighted ongoing economic challenges in the euro-zone, including persistent inflationary pressures despite a broader disinflationary trend. Guindos pointed out that consumer prices are expected to see a short-term increase, which comes at a time when the euro-zone economy is subdued and the labor market remains fragile.
The ECB's current stance appears to be one of caution. While inflation in the euro-area is at a two-year low, it still surpasses the ECB's target of 2%. This situation is compounded by factors such as the end of government financial aid programs and rising wages. Moreover, energy and food prices continue to be volatile due to geopolitical tensions, fiscal policies, and the impact of the climate crisis.
Despite these challenges, the ECB seems to have reached the peak of its rate-hiking cycle after a record period of tightening monetary policy. ECB President Christine Lagarde has set expectations for borrowing costs to stabilize, contrasting with market speculations that suggest a potential rate cut as soon as April. Guindos reinforced this view by stating that holding key ECB rates at their current levels is crucial for controlling inflation.
As policymakers look ahead, they are anticipating the release of new regional projections from the European Commission on Wednesday. These forecasts are expected to play a significant role in informing the Governing Council's risk assessment process and could lead to adjustments in inflation outlooks and policy strategies. The ECB's updated forecasts set to be unveiled in December will further guide their approach toward ensuring price stability within the euro-zone amidst an environment of economic uncertainty.
Source : Economy News by Investing.com / November 13, 2023