Guindos (BCE) insists that wages should not be adjusted for inflation

MADRID, 14 Oct. (EUROPA PRESS) -

The vice president of the European Central Bank (ECB), Luis de Guindos, has once again insisted that wages in the eurozone as a whole should not be adjusted for inflation in order to avoid an inflationary spiral of prices and wages.

"It is very important to avoid second-round effects and prevent inflation from passing through to wages, which would push inflation even higher. To avoid this, inflation expectations have to remain anchored," Guindos said in a interview with the lithuanian daily 'Verslo zinios'.

Regarding the macroeconomic perspectives, the central banker and former Spanish minister has indicated that the eurozone is going to face a "difficult combination" of low economic growth, including a possible technical recession, and high inflation.

In fact, Guindos has warned that the pessimistic scenario published by the ECB in its September macroeconomic projections is getting closer to being the main scenario. In the baseline outlook, the ECB estimated that the eurozone would grow by 0.9% in 2023, while the pessimistic estimate includes a 1% recession.

Something similar happens with inflation. Compared to the main forecast, in the negative scenario the average increase in prices in 2023 would be 6.9%, which is 1.4 points more.

Asked if the euro zone will register interest rates of around 4%, as they were before the global financial crisis of 2008, Guindos has indicated that the structural factors that had depressed inflation until now have begun to change.

"Globalization is not going to be as intense as it was and the energy 'shock' may push inflation higher. Therefore, I believe that monetary policy must be adjusted to these new structural characteristics that may push inflation higher compared to the past decade", he added.