(Finance) – The ECB’s monetary policy “it must remain focused on reducing demand support and avoiding the risks of second-level effects” from high inflation. In the current context of uncertainty, decisions will be taken “meeting by meeting” by the Governing Council, based on the data. And at the December meeting “the decisions we take will be based on various elements, including macroeconomic forecasts” which will be updated. This was stated by the vice president of the monetary institution, Luis de Guindos, in his speech at the financial week in Frankfurt.
De Guindos reiterated that in December “we also look forward to defining the key principles for destocking our money portfolios”. But on this “we will proceed with prudence – he pointed out – by continuing to normalize the monetary line in line with our price stability mandate”. As regards the issue of interest rates, the fact that the vice president directly links the December decision with the revision of the forecasts could be interpreted as a bullish signal once again, given that a worsening of the inflation estimates.
“In the last year, the prospects for financial stability have worsened twice, both in the spring and in the report that the ECB will publish this week and which will explain “how the deterioration of economic and financial conditions has further increased the risks for the stability of the financial system of the eurozone,” he continued.
The Russo-Ukrainian War has triggered “a consistent fix” the market prices of financial assets. “So far this repricing has generally been orderly, but market volatility has increased leading to spillovers to profit margins and liquidity. Asset valuations remain sensitive to the uncertain dynamics of inflation, the normalization of monetary policy and economic activity”he added.