Guindos anticipates a rebound in inflation in the coming months

MADRID, 13 Nov. (EUROPA PRESS) -

The euro zone inflation rate, which has been on a downward trajectory over the past 12 months and fell substantially in both September and October to 2.9%, is likely to see a "temporary rebound" in the coming months. months as base effects disappear from the year-on-year calculation, as warned by the vice president of the European Central Bank (ECB), Luis de Guindos.

"We expect a temporary rebound in inflation in the coming months as the base effects of the sharp increase in energy and food prices in the fall of 2022 disappear from the year-on-year calculation," the Spanish economist noted during a conference. in Frankfurt.

In this sense, the vice president of the ECB explained that the moderation observed in recent months in the inflation rate was partly due to strong base effects, reflecting a fall in energy prices and lower inflation in food, goods and services.

Despite the expected rebound in price increases in the coming months, Guindos has stressed that the ECB considers that the general disinflationary process "will continue in the medium term."

In any case, it has recognized that energy prices continue to be an important source of uncertainty amid growing geopolitical tensions and the impact of fiscal measures, as well as in the case of food prices, which could be subjected to upward pressures due to adverse weather events and the climate crisis.

Regarding core inflation, whose preliminary estimate points to 4.2% in October, the former Spanish Minister of Economy has warned that the pressures on internal prices remain strong and are increasingly driven by wage pressures and the evolution of profit margins.

Thus, although most metrics on long-term inflation expectations are around 2%, it has been pointed out that some indicators remain high and it is necessary to follow them closely.

"Today, inflation is significantly lower, but it is still expected to remain too high for too long," Guindos summarized.

He also recalled that the growth prospects of the euro zone economy have deteriorated further, as global growth momentum slows and tighter financial conditions weigh increasingly on investment and spending. consumers.

Thus, after the eurozone's GDP fell by 0.1% in the third quarter, the vice president of the ECB has warned that the signs point to manufacturing production remaining firmly in contractionary territory, while the sector of services has weakened further.

"The euro zone economy is likely to remain weak in the short term," he said, although he is confident that it will strengthen again in the medium term, as inflation continues to fall, real household incomes will decline. recover and demand for euro area exports recovers.

On the other hand, he has warned that, in this context, signs are beginning to be detected that the labor market is beginning to weaken, when until now its resilience has been a positive point for the euro zone economy.

In this sense, he has indicated that fewer new jobs are being created and employment expectations continued to decline in October for both the services and the manufacturing sector.?