The ECB's stance increasingly shows that interest rates will remain high for longer than some expect, as Luis De Guindos mentioned last Monday. The ECB is seeing the economy weaken and inflation on track to reach its target.
Whilst inflation shows a decrease from last year, it persists at high levels. However, the euro area's growth prospects have dimmed, impacted by a global deceleration in growth momentum and tighter financial conditions putting pressure on both consumer spending and investment. Presently, inflation hovers below 3 per cent, yet Luis de Guindos remarked last Monday about the expected short-term rebound in the months ahead due to the base effects of the significant surge in energy and food prices in autumn 2022. However, a lasting disinflationary pattern is foreseen in the medium term, with uncertainty looming over energy prices intensified by geopolitical tensions and fiscal measures' impacts.
Though the European labour market retains relative strength, signs of gradual weakening are emerging. Job opportunities are increasingly scarce, and recent projections indicate a continued decline in employment expectations across both manufacturing and service sectors in October.
The ECB remains resolute in bringing inflation back to its 2 per cent target, evaluating the impact of its current interest rates. According to Luis de Guindos, maintaining these interest rates for a long period would significantly contribute to this objective. The commitment to this goal remains firm, with close monitoring of the evolving situation.