Despite a record cycle of monetary tightening, with deposit rates anticipated to peak at 4% into 2024, markets are predicting potential rate cuts as early as April. Inflation in the euro-area remains stubbornly high at 2.9%, still above the ECB’s target of 2%. As government financial support begins to wane and wages increase, there are growing concerns about maintaining price stability.
Luis de Guindos, Vice President of the ECB, forecasted a temporary spike in inflation, while Centeno warned of a slower pace in achieving the inflation target. He also emphasized the need for reducing the ECB’s balance sheet but ruled out any immediate second-round effects that could further exacerbate inflationary pressures. Additionally, Centeno dismissed any acceleration in the asset purchase program as a response to the current economic challenges.
The euro-area’s economic health is under close scrutiny as policymakers navigate between curbing high inflation and fostering growth amidst fears of a downturn. The ECB’s next moves will be closely watched by investors and analysts alike as they assess the impact of monetary policy on the region’s fragile economy.
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Source: Economy - investing.com
