Guindos Says ECB Is Reviewing Incoming Economic Data ‘Carefully’
While growth in the 19-nation currency bloc has been weaker than expected, much of the slowdown in recent months has been driven by temporary developments, Luis de Guindos told an audience in Madrid. The Spaniard sees “sound factors of resilience,” with favorable financing conditions, a strong labor market and low energy prices supporting the expansion.
Still, geopolitical uncertainties, the threat of protectionism and financial-market volatility have proven to be more persistent than initially foreseen, he said. Therefore, the ECB’s description of the necessary conditions before it would consider raising borrowing costs is “crucial.”
The remarks follow weeks of unexpectedly bad data, with manufacturing across the region slumping and business sentiment subdued. The central bank has said it would keep interest rates at their record-low levels until “at least through the summer,” while market speculation has increased that a hike won’t be possible until well into 2020.
“The date-based element ensures that our stimulus is not weakened by premature expectations of a rate hike,” Guindos said on Monday. He added that the ECB’s pledge to also wait for as long as necessary to ensure sustained improvements in inflation “ensures that the stance will continue to evolve gradually and in a data-dependent manner.”
Guindos said the ECB hasn’t discussed an extension of targeted longer-term loans and will analyze the current program in the coming months.