ECB's de Guindos: Will start with quantitative tightening sooner or later

European Central Bank (ECB) Vice President Luis de Guindos reiterated on Tuesday that they will continue raising rates to a level that ensures inflation will come back into line with the ECB's definition of price stability, as reported by Reuters.

Key takeaways

"That level will depend on the data that we receive, the evolution of inflation, economic conditions, demand, and energy prices."

"At our next meeting, we will base our decision on the new projections that will be released in December and Eurostat's flash inflation estimate for November, among other indicators."

"My opinion is that inflation will hover around its present level of 10.7% over the next few months. It will start to decline in the first half of next year, but, on average, headline and core inflation will remain very high."

"I think the trend will be downwards in the first half of next year, even if still high on average."

"In my view, there is a high probability that quarterly growth in the fourth quarter of this year will be negative. Negative quarter-on-quarter growth is likely to continue in the first quarter of 2023."

"We will start with quantitative tightening it sooner or later, for sure in 2023."

"We will proceed with a lot of prudence and caution."

"Financial stability has deteriorated quite a lot over the last six months."

"However, the situation of the banks is much more positive now than it was ten years ago."

Market reaction

EURUSD showed no immediate reaction to these comments and was last seen losing 0.25% on the day at 0.9995.