Luis de Guindos, Vice-President of ECB, in speech today, indicated that the “rapid pace of disinflation” observed in 2023 is likely to “slow down” in the coming year, with a “pause” early in the year, mirroring the pattern seen in December 2023.
De Guindos also pointed out that “soft indicators” suggest an economic “contraction” in December, hinting at the likelihood of a “technical recession” in the latter half of 2023. This downturn is expected to have broad impacts across various sectors, with “construction and manufacturing” being particularly hit. “Services” sector is also anticipated to “soften in the coming months as a result of weaker activity in the rest of the economy.”
Regarding the ECB’s monetary policy, de Guindos expressed that the “current level of interest rates,” if maintained, would substantially aid in returning inflation to the ECB’s target. He underscored that the “key ECB interest rates” remain the central instrument for monetary policy, emphasizing that future decisions will be “data-dependent,” focusing on the “appropriate level and duration of restriction.”
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