ECB’s Guindos Says Soaring Prices Are Europe’s Main Problem

Alonso Soto, Bloomberg News

Luis de Guindos, vice president of the European Central Bank (ECB), during a news conference in Amsterdam, Netherlands, on Thursday, June 9, 2022. The ECB brought down the curtain on years of ultra-loose policy, committing to a quarter-point increase in interest rates next month and opening the door to a bigger hike in the fall. , Bloomberg

(Bloomberg) -- European Central Bank Vice President Luis de Guindos said the biggest problem facing the continent’s economy is record inflation, which is becoming more broad-based, threatening investment and consumer spending.

“Reducing inflation is the main contribution we can have to improve the economic situation,” Guindos told an event Monday in Madrid.

ECB officials agree that interest rates must continue rising to combat the steepest price gains since the euro was introduced. But they’re awaiting September inflation data due later this week before deciding by how much.

With economists predicting another record reading for the euro zone, the expectation is for a repeat of this month’s 75 basis-point hike. Governing Council member Martins Kazaks said Friday that he currently favors another move of that size.

Guindos said the number and size of rate increases will depend on incoming data. He also said:

The euro-zone economy will slow significantly in the third and fourth quarters
The ECB is aiming to keep inflation expectations anchored, wants to avoid second-round effects
Fiscal policy amid the energy crisis should be more targeted and temporary