Underlying inflation in the euro area is proving to be very strong, but the price gauge, which excludes volatile items, should ultimately slow, according to European Central Bank Vice President Luis de Guindos.
(Bloomberg) — Underlying inflation in the euro area is proving to be very strong, but the price gauge, which excludes volatile items, should ultimately slow, according to European Central Bank Vice President Luis de Guindos.
“Core inflation remains very sticky,” Guindos said at an event in Madrid on Friday, adding that it may be more persistent than what markets had anticipated.
Guindos said that while he is confident core inflation will ease, its downward path should be stable in order for the ECB not to lose credibility.
The Frankfurt-based central bank is widely expected to increase its deposit rate at its next policy meeting on May 4, with the choice likely to be either a quarter- or half-point step. Inflation numbers for April — due just two days before that — are set to help determine the size of the move, with policymakers increasingly focusing on underlying inflation, which strips out prices increases for food and energy.
Guindos highlighted that any future moves will be data dependent, and that the ECB will stick to its stance of providing little forward guidance until the macro outlook clears up.
ECB President Christine Lagarde said on Thursday the central bank still has “a little way to go” to curb persistently-high inflation.
(Adds Guindos comments in 3rd and 5th paragraphs)
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