Guindos says that 25 basis points is the "new norm" in the "final stretch" of rate increases

Stresses the importance of political stability and trusts in the strengths of Spain when the government comes out of the elections

MADRID, 1 Jun. (EUROPA PRESS) -

The vice president of the European Central Bank (ECB), Luis de Guindos, has indicated that the current path of interest rate rises, which began in July 2022 and has increased the price of money by 375 basis points after seven consecutive rises, it is approaching the "final stretch", in which an increase of 25 basis points, as in the last meeting of the Governing Council, is the "new norm".

"There is a perception that a large part of the path of rate increases has been carried out and the last part remains, the final stretch," said the Spanish economist in an interview with RNE, where he reiterated that the amount of the rises in this final stretch will depend on incoming data, as well as new macroeconomic projections and the transmission of monetary policy.

In this sense, the vice-president of the ECB recalled that at the last meeting of the entity's Governing Council it was agreed to moderate the pace of rate hikes to 25 basis points. "I think this is the new norm", he has anticipated.

In any case, for Guindos the situation of very low rates, even negative ones, of previous years is something that corresponds to the past and that was not normal, for which reason he has predicted that, at least in the next three or four years, the rates will be at slightly positive levels.

On the other hand, he once again stressed that the inflation data published this week in several euro area countries, including Spain, "are positive" and show that inflation is falling, although he has warned that in the case of the underlying rate will be a more limited reduction and underlined that "we are still a long way from the inflation target."

Likewise, although he has once again defended the coordinated action of monetary and fiscal policy during the pandemic, the Spanish economist has pointed out that "other moments are coming now", with new fiscal rules and therefore he has defended that fiscal policy "does not may be an open bar" that clashes with monetary policy.

Thus, for Guindos, support will have to be reduced and sustainability programs implemented, with an adjustment that should take place gradually but continuously.

When questioned about the electoral advance in Spain, the former Minister of Economy has assured that political stability is always important, although he has defended that Spain has economic strengths whatever the result of the elections.

In this regard, he stressed that Spain has a healthy financial system while exporting more than it imports, which shows that it is a competitive economy.

"We have a pending challenge, which is real convergence, convergence in terms of wealth and income with the European average," Guindos pointed out.

"The parliamentary majority, well, it is always important to have political stability, but I believe that the bases of the Spanish economy to recover that economic growth and close that wealth gap with Europe are there and any government, whatever comes out, has those foundations to achieve it", he summarized.