The vice president of the European Central Bank (ECB), Luis de Guindos, said this Monday (4), that the size of the interest rate increase in September will depend on the update of the medium-term inflation outlook. Thus, according to the banker, if medium-term inflation prospects persist or deteriorate, an increase greater than 25 basis points will be appropriate.
According to the banker, in recent months, inflationary pressures have increased and intensified in many goods and services. “We expect that moderating energy costs, easing pandemic-related supply disruptions and normalizing monetary policy will lead inflation to return to the 2% target over the medium term. But the risks around inflation are high,” he analyzed, speaking at the Frankfurt Euro Finance Summit.
Guindos also commented that the ECB will continue to use the necessary flexibility to counter any threats to the transmission of monetary policy. “Our commitment to combating fragmentation should not interfere, but rather allow a greater focus on monetary policy guidance,” he said. “Avoiding fragmentation allows us to adjust our monetary policy at the proper pace and stabilize inflation at our target.”
However, the war and the risk of further disruptions to the eurozone’s energy supply remain a significant downside risk to growth. “The scenario of our June projections reflects this risk and implies a contraction of activity in 2023, after weaker growth, but still positive in 2022”, he predicts.
Source: CNN Brasil
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