(Bloomberg) -- The European Central Bank is clearly on a path of lowering interest rates, but how much it cuts at each monetary policy meeting is not as important, Vice President Luis de Guindos said.
He added that wage growth will slow next year and that the ECB expects the pace of consumer-price rises to converge toward its 2% target.
“If our inflation projections for next year are indeed met, the path of monetary policy is clear,” he told a conference organised by insurer Mapfre’s Economic Observatory and El Confidencial in Madrid on Friday. “The question of whether we cut 50 or 25 basis points is much less important.”
The ECB is widely expected to reduce borrowing costs for the fourth time since June at its last rate meeting of the year next month. Policymakers, who have only lowered the key rate in quarter-point increments so far, must decide whether to speed up the pace of easing as economic headwinds grow.
Trader bets on a half-point rate cut on Dec. 12 jumped to 50% on Friday after data showed gauges of business activity in the bloc’s two biggest economies contracted more than expected. This compared with about 15% on Thursday.
Guindos told Bloomberg Television earlier this week that officials shouldn’t rush the process due to uncertainties including rising trade tensions and global conflicts.
Turning to President-elect Donald Trump’s threats to raise tariffs on imported goods, Guindos said targeted countries will react with their own hikes, leading to a “vicious circle of trade war.”
“If you put a 60% tariff on Chinese products, China will start looking for other markets and that will divert trade flows to other jurisdictions,” he said on Friday. “The trade war, as analysed in the 1930s, has a very negative impact from the point of view of economic growth and also has, although to a lesser extent, an impact on inflation.”
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