Latest news with #LuisdeGuindos
Free Malaysia Today
4 days ago
- Business
- Free Malaysia Today
ECB relaxed about euro strength, risk of too low inflation, says de Guindos
European Central Bank vice-president Luis de Guindos said the exchange rate had not been volatile, nor had its appreciation been rapid. (EPA Images pic) FRANKFURT : Tariffs will weigh on euro zone economic growth and prices for years, but there is little risk of inflation falling too low, and even the euro's surge against the dollar is not a major worry, European Central Bank (ECB) vice-president Luis de Guindos said. The ECB signalled a pause in policy easing this month despite projections showing price growth dipping below its 2% target temporarily on the strong euro and low oil prices, reviving worries that the ultra-low inflation environment of the pre-pandemic decade could return. However, de Guindos played down those fears, arguing that the ECB was finally within striking distance of its target after years of under- and overshooting. 'The risk of undershooting is very limited in my view,' de Guindos told Reuters in an interview. 'Our assessment is that risks for inflation are balanced,' he said. ADVERTISEMENT VIDCRUNCH Next Stay Playback speed 1x Normal Quality Auto Back 360p 240p 144p Auto Back 0.25x 0.5x 1x Normal 1.5x 2x / A key reason why inflation will rebound to target after dipping to 1.4% in the first quarter of 2026 is that the labour market remains tight and unions will keep demanding healthy increases, keeping compensation growth at 3%, de Guindos argued. While de Guindos did not explicitly argue for a pause in policy easing, he said that financial investors, who now bet on just one more interest rate cut, possibly towards the end of the year, correctly interpreted ECB President Christine Lagarde's message. 'Markets have understood perfectly well what the president said about being in a good position,' he said. 'I think that markets believe and discount that we are very close to our target of sustainable 2% inflation over the medium term,' he added. The euro has risen by 11% against the dollar in the past three months, hitting its highest level in almost four years at US$1.1632 on Thursday. As well as dealing exporters another blow on top of US tariffs, a stronger euro could lower imported prices further. However, de Guindos said the exchange rate had not been volatile, nor had its appreciation been rapid, two key metrics in his view. 'I think that, at US$1.15, the euro's exchange rate is not going to be a big obstacle,' said de Guindos, a former Spanish economy minister and the longest-serving ECB board member. Reserve currency? De Guindos poured cold water on talk that the euro could soon challenge the dollar's status as the world's dominant currency. The euro zone still lacked the necessary financial architecture or defence capabilities to become a real challenger and that is also going to limit its gains, another argument to counter fears over too low inflation. 'The role of the US dollar as a reserve currency in the short term is not going to be challenged, in my opinion,' de Guindos said. The dollar accounted for about 58% of global foreign exchange reserves at the end of 2024. While that is down 10 percentage points from a decade earlier, the euro's share has not increased from around 20%. Instead, smaller currencies have benefited. Although excessive government spending and erratic policy in the US have raised questions about debt sustainability and the status of the dollar, there are no doubts about the reliability of the US Federal Reserve (Fed), de Guindos added. He said the ECB was convinced that the Fed's recently renewed dollar backstop would remain in place and that gold reserves kept by some of the bloc's central banks at the New York Fed were so safe that even the idea of moving them amid the current political turmoil did not come up.
Reuters
5 days ago
- Business
- Reuters
ECB has learned its lesson about ills of easy money, de Guindos says
FRANKFURT, June 16 (Reuters) - The European Central Bank has learned its lesson about aggressive money printing and will pay more attention to the side effects of easy money in the future, the ECB's Vice-President Luis de Guindos told Reuters. Having vanquished high inflation, the ECB is reviewing its long-term strategy as well as its policy toolkit, including the massive bond purchases and negative interest rates it deployed over the last decade when price growth was too sluggish. Its 5 trillion-euro ($5.8 trillion) wave of money printing, known in market parlance as quantitative easing (QE), has been criticised for creating bubbles in property and financial markets, and for setting up the ECB for large losses once interest rates rise. De Guindos said "all the instruments" used in the past would remain in the ECB's toolbox but he and his colleagues had become more aware of their drawbacks. "We have learned much more about side effects, and we are going to pay more attention to financial stability considerations," he told Reuters in an interview. "QE, for instance, was a new instrument." He said another learning point was that "sometimes it's much easier to start using the instrument than to withdraw it". Borrowing costs for Italy shot up in the summer of 2022 when the ECB stopped its bond purchases and prepared to raise interest rates, forcing the central bank to come up with a new safety net for indebted countries. ECB policymaker and Croatian central bank governor Boris Vujcic also said in a recent interview that "the bar for QE would be higher" in the future. The ECB is due to present the conclusions of its strategy review, the first since 2021, in the early summer. Some policymakers in the ECB's hawkish camp were hoping for the new strategy statement to contain self-criticism, but sources told Reuters this was unlikely to feature. A staff analysis presented to policymakers last month found that QE and other stimulus tools such as negative rates had been, on balance, beneficial. This research was expected to be published as working papers in the autumn. De Guindos also said the new strategy statement would mainly reflect the changed economic situation from a world of low inflation and interest rates to one where prices grow faster and trade is disrupted. "I would not expect big surprises," he said of the statement currently being drafted. "It will be much more focused on how the framework for central banks and for the ECB has changed over the last five years." ($1 = 0.8674 euros)
Business Recorder
5 days ago
- Business
- Business Recorder
ECB has learned its lesson about ills of easy money, de Guindos says
FRANKFURT: The European Central Bank has learned its lesson about aggressive money printing and will pay more attention to the side effects of easy money in the future, the ECB's Vice-President Luis de Guindos told Reuters. Having vanquished high inflation, the ECB is reviewing its long-term strategy as well as its policy toolkit, including the massive bond purchases and negative interest rates it deployed over the last decade when price growth was too sluggish. Its 5 trillion-euro ($5.8 trillion) wave of money printing, known in market parlance as quantitative easing (QE), has been criticised for creating bubbles in property and financial markets, and for setting up the ECB for large losses once interest rates rise. De Guindos said 'all the instruments' used in the past would remain in the ECB's toolbox but he and his colleagues had become more aware of their drawbacks. 'We have learned much more about side effects, and we are going to pay more attention to financial stability considerations,' he told Reuters in an interview. 'QE, for instance, was a new instrument.' He said another learning point was that 'sometimes it's much easier to start using the instrument than to withdraw it'. Borrowing costs for Italy shot up in the summer of 2022 when the ECB stopped its bond purchases and prepared to raise interest rates, forcing the central bank to come up with a new safety net for indebted countries. ECB policymaker and Croatian central bank governor Boris Vujcic also said in a recent interview that 'the bar for QE would be higher' in the future. The ECB is due to present the conclusions of its strategy review, the first since 2021, in the early summer. Some policymakers in the ECB's hawkish camp were hoping for the new strategy statement to contain self-criticism, but sources told Reuters this was unlikely to feature. ECB can take time on policy, policymaker Nagel says A staff analysis presented to policymakers last month found that QE and other stimulus tools such as negative rates had been, on balance, beneficial. This research was expected to be published as working papers in the autumn. De Guindos also said the new strategy statement would mainly reflect the changed economic situation from a world of low inflation and interest rates to one where prices grow faster and trade is disrupted. 'I would not expect big surprises,' he said of the statement currently being drafted. 'It will be much more focused on how the framework for central banks and for the ECB has changed over the last five years.'
Bloomberg
5 days ago
- Business
- Bloomberg
ECB's Guindos Says Risk of Inflation Undershoot Very Limited
The threat of inflation falling short of the European Central Bank's 2% target is contained, Vice President Luis de Guindos told Reuters. While consumer-price growth is expected to slow to 1.4% in the first quarter of 2026, that won't de-anchor expectations, the Spanish official said in an interview. At the same time, wage increases are easing to levels seen as compatible with the ECB's goal.
New Straits Times
5 days ago
- Business
- New Straits Times
ECB has learned its lesson about ills of easy money, de Guindos says
FRANKFURT: The European Central Bank (ECB) has learned its lesson about aggressive money printing and will pay more attention to the side effects of easy money in future, the ECB's Vice-President Luis de Guindos told Reuters. Having vanquished high inflation, the ECB is reviewing its long-term strategy as well as its policy toolkit, including the massive bond purchases and negative interest rates it deployed over the last decade when price growth was too sluggish. Its €5 trillion (US$5.80 trillion) wave of money printing, known in market parlance as quantitative easing (QE), has been criticised for creating bubbles in property and financial markets, and for setting up the ECB for large losses once interest rates rise. De Guindos said "all the instruments" used in the past would remain in the ECB's toolbox but he and his colleagues had become more aware of their drawbacks. "We have learned much more about side effects, and we are going to pay more attention to financial stability considerations," he told Reuters in an interview. "QE, for instance, was a new instrument." He said another learning point was that "sometimes it's much easier to start using the instrument than to withdraw it". Borrowing costs for Italy shot up in the summer of 2022 when the ECB stopped its bond purchases and prepared to raise interest rates, forcing the central bank to come up with a new safety net for indebted countries. ECB policymaker and Croatian central bank governor Boris Vujcic also said in a recent interview that "the bar for QE would be higher" in future. The ECB is due to present the conclusions of its strategy review, the first since 2021, in the early summer. Some policymakers in the ECB's hawkish camp were hoping for the new strategy statement to contain self-criticism, but sources told Reuters this was unlikely to feature. A staff analysis presented to policymakers last month found that QE and other stimulus tools such as negative rates had been, on balance, beneficial. This research was expected to be published as working papers in the autumn. De Guindos also said the new strategy statement would mainly reflect the changed economic situation from a world of low inflation and interest rates to one where prices grow faster and trade is disrupted. "I would not expect big surprises," he said of the statement currently being drafted. "It will be much more focused on how the framework for central banks and for the ECB has changed over the last five years."
