de Guindos: Risks That Could Derail Disinflation Process Are Clear

Q: In terms of the degree of restrictiveness, are you concerned that this bumpiness could de-anchor expectations and hamper disinflation process?

A:

• Although I am confident, the risks that could derail the disinflation process is clear (e.g. geopolitics, fiscal policy in the US). These risks increase our prudence.
• In normal circumstances, we will reduce the restrictiveness of our policy.

In response to a separate question on the importance of unwinding supply side shocks on the Eurozone economy, relative to domestic factors such as the labour market:

A:

• If terms of trade normalise, you have conditions for higher growth without higher inflation.
• The labour market and unit labour costs are key to defining our policy stance.