Luis de Guindos dismisses rates cuts and says getting back to 2 per cent target will not be easy.
| Luis de Guindos has dismissed talk of rate cuts by the European Central Bank as “premature”, warning that hurdles over “the last mile” of bringing inflation back to rate-setters’ 2 per cent target will be tough to overcome.
Along with oil, rapid wage growth, a weaker euro and resilient demand for services could also keep inflation high.“This is, at the end of the day, a very delicate balance,” he said, speaking a few days before eurozone inflation data was released on Friday showing it had fallen more than economists expected to 4.3 per cent in the year to September.
“If the transmission is incomplete, then we should be a little more patient,” he said. “If the transmission is much closer to completion, then we should consider the next steps to guarantee that inflation converges to our target.” “After four years without EU fiscal rules, governments may have got used to a little bit of a ‘whatever it takes’ approach with respect to fiscal policy,” Mr De Guindos said. “But that has to change. Having a tightening of monetary policy and, simultaneously, an expansionary fiscal policy would be a very bad policy mix.”
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