The vice president of the European Central Bank (ECB) Luis de Guindos argues that unions should moderate wage demands, given the rise in prices, so as not to “feed” the inflation curve.
“Unions [da zona Euro] they are inclined to ask for excessive salary increases. We have to be careful,” ECB Vice President Luis De Guindos said in an interview published today by the German newspaper Suddeutsche Zeitung.
“A spiral between wages and prices must be avoided,” he reinforced, adding that “nobody wins” when an inflationary movement is triggered by wage increases.
“If we go into a spiral between wages and prices, the ECB will have to raise interest rates, more than it would have done otherwise,” he said, noting that the situation could increase “further” the cost of credit. .
The former Minister of Economy of the Spanish Government of the Popular Party (2011-2018) suggests that it is up to the public powers to support purchasing power “through the implementation of specific aid to alleviate the impact of inflation.”
“This way, people could reduce wage demands and the ECB would not have to tighten monetary policy as much. This would be a win-win situation,” he said.
For the vice president of the ECB, the “spiral in terms of wages” could hinder “the efforts of the ECB”, at a time when inflation begins to slow down in the Euro Zone.
Inflation fell from 10.4% in October 2022 to 8.5% in January, for the third consecutive month, according to the ECB, thanks to a “calm” in energy prices and the unblocking of supply chains.
Even so, Luis de Guindos defends that one cannot lower one’s guard because, he adds, the reopening of the economy in the People’s Republic of China, after the sanitary restrictions, “leads to an increase in the demand for energy, metals and goods, which that could put pressure on prices.
In Germany, inflation rose slightly in January.
The ECB has moved dramatically on monetary policy, raising rates five times since July 2022 – an unprecedented pace.
The ECB’s objective is to curb consumer demand and, in particular, to curb price rises.
After a probable rise of 0.50 points in the reference rates at the next ECB meeting in March, “further rate hikes cannot be ruled out,” added the ECB vice-president.
Source: TSF
