(Bloomberg) -- European Central Bank Vice President Luis de Guindos warned that it’s too early to give the all clear on inflation even after the “positive surprise” of September’s data.
“We cannot claim victory,” he said on Friday. “That’s because services inflation remains high — it has been moderating, but only very, very, very slightly.”
Euro-area inflation eased to 1.8% in September, slowing below the ECB’s 2% target for the first time since 2021. The number, though, is depressed by volatile energy costs and will probably increase again toward year-end. And other gauges are stubbornly high.
Speaking in Madrid, the vice president highlighted that “a lot will depend on the evolution of wages and productivity, unit costs, and that is the event that we have to watch.” Still, “projections indicate that at the end of next year inflation will be at a very stable 2%.”
Markets and economists are betting that slower consumer prices and a weak economy will allow the ECB to cut interest rates at the Oct. 16-17 gathering, a move that would mark an acceleration from previous moves at just every second meeting — the ECB has cut twice in this easing cycle, in June and September.
Guindos said that while some of his colleagues on the Governing Council have “made their preferences explicit” on what to do this month, he “thinks it’s better to be cautious in these matters.”
“The inflation data that we’ve seen have been a positive surprise, and there’s a downward risk in the economic growth data,” he said. “That’s something we’d already accounted for in our forecasts.”
Policymakers will “analyze all the numbers in October,” with a focus on the bigger trends, he said. “I would say that the direction of monetary policy is clear.”
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