ECB Vice President Luis de Guindos expressed optimism about the Eurozone's economic recovery, despite acknowledging remaining risks. He indicated that while economic risks for the 20 Eurozone countries remain skewed to the downside, economic recovery is expected to strengthen over time. Factors such as increased real income and easing of restrictive monetary policies will support consumption and investment. Additionally, the rise in global demand is likely to continue driving exports and economic recovery.
De Guindos' remarks align with the ECB's recent economic assessment, which suggested slowing economic growth and further inflation easing, leading to expectations of accelerated rate cuts. Currently, the money market shows a 90% chance of the ECB conducting its third rate cut of the year within two weeks.
ECB President Christine Lagarde mentioned that officials are increasingly confident that consumer price increases will slow to the 2% target in time, a sentiment that will be reflected in the upcoming meeting on October 16-17. Recent data showed that the inflation rate for the 20 Eurozone countries fell below the target for the first time since 2021.
However, ECB Governing Council member Martins Kazaks cautioned that some investors and economists might be too optimistic about the potential for easing policies. De Guindos emphasized that the recovery of the European economy should be built on the expected rebound in productivity growth, which has been particularly weak since the pandemic.
Overall, despite uncertainties, ECB officials maintain cautious optimism about the Eurozone's economic recovery. They expect faster growth with the gradual lifting of restrictive policies and a rebound in global demand. Meanwhile, they continue to closely monitor inflation and productivity trends to guide future monetary policy decisions.
