The vice president of the European Central Bank (ECB), Luis de Guindos, has influenced this Thursday on the institution’s position in favor of lowering interest rates at its meeting on June 6. In it, Guindos considers an adjustment of a quarter of a percentage point appropriate, which would take the general rate from 4.50% to 4.25%, the first reduction after the continued increases since the summer of 2022.
“We are adopting a cautious approach, which would favor a reduction of 25 basis points,” says the Spanish economist in an interview with the Austrian newspaper Oberösterreichische Nachrichten, in which he underlines that the ECB has not made any decision on the number of cuts in interest rates or their magnitude given the high degree of uncertainty.
The banker does not speculate on how many rate cuts may occur in 2024 or the level of rates in 2025. He does assure that the entity does not consider the possibility of raising rates in its base scenario, since it expects that inflation will fluctuate in the short term, but will converge sustainably towards 2% in 2025.
The vice president of the ECB recognizes that there are some risks related to the evolution of salaries and their impact on productivity, unit labor costs and lower profit margins, to which are added geopolitical risks and uncertainties such as the war in Ukraine and the conflict in the Middle East, as well as possible tensions in Southeast Asia.
“We must continue to be very cautious. Nothing is predetermined in terms of cuts or changes in interest rates,” warns Guindos. The general reference remains unchanged from September 2023.
The president of the entity, Christine Lagarde, pointed out this week that inflation is under control after the spikes that followed the pandemic and the outbreak of the war in Ukraine.
