De Guindos predicts that the fall in inflation "will not be so intense" and anticipates economic stagnation

SAN SEBASTIÁN, Oct. 2 (EUROPA PRESS) -

The vice president of the European Central Bank and former Spanish Minister of Economy, Industry and Competitiveness, Luis de Guindos, has stated that "the positive contribution to the fall in inflation is not going to be so important, it is not going to be so intense, nor so deep." like what happened in the last two decades", although "in the coming months its deceleration will continue".

He has also pointed to "economic stagnation" for the second half of the year with "clearly downward risks", with growth "very, very moderate, close to around 0%".

The vice president of the ECB took part this Monday in the XV Business Forum of the Diario Vasco at the newspaper's headquarters in San Sebastián.

For Guindos, the greatest risks are in commercial real estate with falling prices in many countries.

De Guindos has pointed out that the latest ECB forecasts indicate lower growth in the economy and slightly more inflation in the year 23 and 24. "We see growth for this year as very moderate, at 0.7 percent in the euro and in the second part of the year we are practically expecting a stagnation of the economic situation," he noted.

"The reasons are the effect of past inflation on consumption in Europe, that is, it has reduced the purchasing power of families; the lower growth of the world economy, China has a lot to do with it," with its "internal crisis of debt and the real estate situation is subtracting economic growth.

He has indicated that the ECB has "slightly increased the growth projection (of inflation) due to the evolution of the price of oil, which is currently rising and is approaching 100 dollars a barrel; the depreciation of the euro and unit labor costs" .

To this he added that underlying inflation "will continue to be relatively high, but most of its indicators, in the medium term, show that it is slowing down." De Guindos stressed that "general inflation has fallen quite a bit" and thus, he recalled that "practically a year ago inflation was above 10% in Europe and the latest indicator we have, which came out last Friday, is that is slightly above 4%."

"The underlying is somewhat more stable, but it is also beginning to slow down, that is, the underlying elements, I repeat, are positive," he reiterated.

Regarding the labor market, he has indicated that there is "a slowdown in job creation, but, and this is important, with growth." Furthermore, he has pointed out that "productivity is not growing, that is, it is somehow slowing down" and "unit labor costs in the euro zone are growing." De Guindos has stressed that this is "one of the biggest concerns from the point of view of inflation."

On the other hand, he hopes that "the improvement in business margins in the euro zone in 2022 will absorb part of the increase in unit labor costs", which "will somehow have a positive, moderating effect on inflation." .

De Guindos has referred to the increase in interest rates which, in his opinion, if maintained over time as they are, will make a "substantial contribution" to the objective of "convergence of inflation towards 2%." "From there what we are going to do is in some way look at the evolution of the data," because "there is a high level of economic uncertainty."

Regarding the labor market, he noted that there is "a slowdown in job creation, but, and this is important, with growth."

Furthermore, he pointed out that "productivity is not growing, that is, it is somehow slowing down" and "unit labor costs in the euro zone are growing." De Guindos has stressed that this is "one of the biggest concerns from the point of view of inflation."