European Central Bank Warns of Economic Uncertainty Impacting Growth Projections
Luis de Guindos highlights downward revisions in growth forecasts due to global uncertainties and geopolitical tensions.
Luis de Guindos, the Vice President of the European Central Bank (ECB), has emphasized the "monumental" uncertainty currently facing the global economy, which is reflected in the ECB's recent downward revisions of growth projections.
Speaking at an event organized by the European Insurance and Occupational Pensions Authority (EIOPA), Guindos indicated that Europe is at a "crossroads" as it contemplates the need for increased defense spending.
According to Guindos, key factors contributing to the bleak growth forecast include investments and exports.
He noted that uncertainty in the global economy is negatively affecting investor confidence, while escalating trade tensions are also impacting export levels.
Guindos advocated for a qualitative approach to analyzing these projections, emphasizing the importance of understanding the underlying factors driving economic changes, rather than focusing solely on numerical precision.
"We must be more qualitative than quantitative," he asserted.
On the topic of inflation, Guindos expressed a more optimistic view, stating that the disinflationary process appears to be progressing well, buoyed by positive trends in wage dynamics.
He opined that the ECB is on a path to converge towards its price stability target of 2% by the end of this year and mid-next year.
Following a decision by the Governing Council last week to lower interest rates by an additional 25 basis points, Guindos underscored the importance of a data-driven approach to monetary policy, given the prevailing uncertainty in the global economy.
Furthermore, Guindos pointed to a geopolitical landscape that necessitates increased defense spending, while stressing the importance of maintaining medium-term fiscal sustainability.
He raised concerns that market reactions could lead to rising yields, potentially harmful to economic stability.
Regarding the effects of fiscal stimulus on the economy, Guindos indicated that further analysis will be required once more details of the defense spending plan are available.
He remarked, "We believe it is a very rational decision, given the geopolitical situation we are facing.
It is simultaneously essential to ensure fiscal sustainability over the medium term."
Guindos also expressed hope that the heightened focus on defense spending will not detract from green financing initiatives and priorities, which remain significant objectives for the European Union.
Speaking at an event organized by the European Insurance and Occupational Pensions Authority (EIOPA), Guindos indicated that Europe is at a "crossroads" as it contemplates the need for increased defense spending.
According to Guindos, key factors contributing to the bleak growth forecast include investments and exports.
He noted that uncertainty in the global economy is negatively affecting investor confidence, while escalating trade tensions are also impacting export levels.
Guindos advocated for a qualitative approach to analyzing these projections, emphasizing the importance of understanding the underlying factors driving economic changes, rather than focusing solely on numerical precision.
"We must be more qualitative than quantitative," he asserted.
On the topic of inflation, Guindos expressed a more optimistic view, stating that the disinflationary process appears to be progressing well, buoyed by positive trends in wage dynamics.
He opined that the ECB is on a path to converge towards its price stability target of 2% by the end of this year and mid-next year.
Following a decision by the Governing Council last week to lower interest rates by an additional 25 basis points, Guindos underscored the importance of a data-driven approach to monetary policy, given the prevailing uncertainty in the global economy.
Furthermore, Guindos pointed to a geopolitical landscape that necessitates increased defense spending, while stressing the importance of maintaining medium-term fiscal sustainability.
He raised concerns that market reactions could lead to rising yields, potentially harmful to economic stability.
Regarding the effects of fiscal stimulus on the economy, Guindos indicated that further analysis will be required once more details of the defense spending plan are available.
He remarked, "We believe it is a very rational decision, given the geopolitical situation we are facing.
It is simultaneously essential to ensure fiscal sustainability over the medium term."
Guindos also expressed hope that the heightened focus on defense spending will not detract from green financing initiatives and priorities, which remain significant objectives for the European Union.
Translation:
Translated by AI
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