(Finance) – “Although inflation is on the right track, we need to keep an eye on the risk factors at play. On the upside, wage pressures remain elevated and we do not yet have enough data to confirm that they are starting to ease. Profit margins may also prove more resilient than expected. Heightening geopolitical tensions, especially in the Middle East, could increase energy prices and disrupt global trade.” Luis de GuindosVice President of the European Central Bank (ECB), in a speech in Split, Croatia
“Even if we are going in the right direction, we must not get ahead of ourselves – he explained – It will still take some time before we have the information needed to confirm that inflation is sustainably returning to our 2% target. That’s why we will continue to be data-driven. THE The coming months will be particularly rich in new information on the factors driving underlying inflation, as we will receive data on the latest wage agreements and re-pricing by companies. We will also have the benefit of new screenings in March. In any case, our future decisions will ensure that our policy rates are set at sufficiently restrictive levels for as long as necessary.”
On the transmission of monetary policy, he said: “I Our past policy rate increases continue to resonate strongly in the financing conditions. During the current rate hike, the increase in bank lending rates has reached levels not seen since the launch of the euro. Meanwhile, the weakening of credit has been stronger and faster than in previous bull cycles. Bank lending conditions remain tight and loan flows are still weak, although the latest bank lending survey showed the first signs of moderation in the net tightening of credit standards and the decline in loan demand.”
de Guindos highlighted the solidity of the banking system and the significant profits made, but also warned about “weak growth in loans, rising financing costs and deteriorating asset quality“, which “could pose downside risks to profits in the future.”
“Although asset quality indicators have been quite robust, there are early signs of deterioration in some loan portfolios, including smaller businesses and sectors such as construction and commercial real estate,” he said. “Nevertheless, the current context of macroeconomic uncertainty shows the importance of remaining vigilant: banks should be prepared for a possible worsening of economic conditions“.