The European Central Bank (ECB) will need to raise key interest rates further to curb inflation in the eurozone. This was stated by the vice president of the ECB Luis de Guindos in an interview with the Portuguese weekly ‘Expresso’. “The slowdown in the economy will not only solve the problem of inflation. We need to continue normalizing monetary policy, “said de Guindos.
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The ECB started raising interest rates in July and raised interest rates further by 0.75 percentage points this month. Further increases are expected in the coming months. “The reality is that inflation is currently 9.1 percent and our target is 2 percent over the medium term. So there is a big difference, ”de Guindos points out.
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The vice president also refers to the uncertain course of the Russian invasion of Ukraine. War and the resulting rise in energy and food prices are seen as the main drivers of high inflation.
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Wages under control
De Guindos is optimistic about inflation in the coming years. “We are projected to be slightly above our target by 2024, with an average inflation rate of 2.3% in the eurozone. In the pessimistic scenario, which assumes a total cessation of gas supplies from Russia, it will be 2.7 percent “.
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Olli Rehn, governor of Finland’s central bank and a member of the ECB’s board of directors, also said he has not yet seen clear signs that rising wages would further fuel inflation. According to him, the growing risk of a recession in the euro area and the slightly rising employment rate appear to have kept wages in check. He also expects the ECB to raise interest rates further this year.
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Read also:
Final figure: inflation in the eurozone reaches an all-time high of 9.1 per cent
The World Bank warns of the recession due to interest rate hikes
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