ECB’s de Guindos: Markets can be wrong about the terminal rate

ECB Vice President Luis de Guindos said he does not anticipate a euro-area recession in the coming years. According to de Guindos, the ECB’s last decision had very high consensus and markets can be wrong about the terminal rate.


“I don’t believe anybody who names a terminal rate”, he added. In prior comments made recently, he said, “I believe that the current approach will be maintained for a few months until the evolution of inflation and the effects of our measures become clearer,” de Guindos said.

He also has explained that underlying inflation, the bank’s chief focus in recent months, will come down but it is proving sticky and needs to come down from rather high levels. de Guindos singled out the rising price of services as his top concern in the ECB’s fight against inflation, saying they were being driven up by higher wages.

Inflation in the Eurozone has fallen from record levels, but the price of services, which range from flight tickets to haircuts, are still rising strongly. “What worries me the most in the underlying inflation trend is the trend in service prices,” de Guindos said at an event in Barcelona.

The ECB raised interest rates for a seventh straight time last week, albeit at a reduced pace, and hinted at more hikes.

Markets expect a fresh, 25-basis-point increase at the ECB’s June meeting and possibly one more by the end of the summer, followed by rate cuts starting early next year.

De Guindos said it was too early to say how many more times the ECB would raise its interest rates as this would mainly depend on the reaction to increases in borrowing costs.