ECB’s de Guindos: We should expect to raise interest rates at this pace for a period of time
22.12.2022, 06:33

ECB’s de Guindos: We should expect to raise interest rates at this pace for a period of time

European Central Bank (ECB) Vice-President Luis de Guindos said on Thursday that “we should expect to raise interest rates at this pace for a period of time.”

Additional quotes

Indication for Q4 2022 is that we are perhaps in negative territory, but not very deep, with GDP expected to contract by 0.2%.

Over the course of the next two or three months inflation will be somewhere around its current level, in q2 2023 it will see a drop to hover around 7% by the middle of the year.

We have no choice but to act.

If we do nothing, the situation would be worse because inflation is one of the factors behind the current recession.

Increases of 50 basis points may become the new norm in the near term.

Our interest rates will then enter into restrictive territory.

I am concerned that markets could underestimate the persistence of inflation.

I am concerned that markets might consider fiscal policy to be incompatible with monetary policy, that there is a potential conflict.

Banks have a solid capital position and can withstand a shock, but i have a lot more doubts about non-banks, notably hedge funds.

Market reaction

In reaction to the above hawkish comments, EUR/USD keeps its upbeat momentum intact at near-daily highs of 1.0650, up 0.43% so far.

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