(Bloomberg) -- The economic revival in the euro area is likely to gain momentum, though dangers remain, according to European Central Bank Vice President Luis de Guindos.
In a speech in Riga that didn’t touch on monetary policy, Guindos warned that risks in the 20-nation bloc are still “tilted to the downside,” while expressing optimism that faster growth can be achieved following a disappointing second quarter.
“We expect the recovery to strengthen over time, as rising real incomes and the gradually fading effects of restrictive monetary policy should support consumption and investment,” Guindos said Wednesday. “Exports should also continue contributing to the recovery as global demand picks up.”
The remarks recall the ECB’s economic assessment last month. They come amid increasing expectations that weaker economic growth and a further slowdown in inflation will prompt the ECB to cut interest-rates faster than envisaged – with money markets currently pricing in a 90% chance of a third reduction of the year in about two weeks.
Hinting at such, President Christine Lagarde said Monday that officials are increasingly confident consumer-price growth will ease to 2% in a timely manner, and this will be reflected at the next meeting on Oct. 16-17.
Inflation across the 20-nation euro zone dipped below target in September for the first time since 2021, data Tuesday showed.
Governing Council member Martins Kazaks told Bloomberg that the ECB is likely to lower borrowing costs this month and beyond. But he warned that some investors and economists expect too much loosening.
Guindos said Europe’s recovery “should be underpinned by an expected recovery in productivity growth, which has been particularly weak since the onset of the pandemic.”
©2024 Bloomberg L.P.
