Bank of Spain Governor and thus a European Central Bank Governing Council member Pablo Hernandez de Cos spoke on Wednesday.
While he wasn't explicit on rate cuts I am reading between the lines.
Slowing economy:
- "Economic activity has continued to show clear weakness and is only expected to increase its degree of dynamism gradually”
- “In the third quarter, GDP decreased by 0.1% and available indicators suggest stagnation in the fourth”
- “risks to economic growth remain skewed to the downside.”
On inflation:
- the recent “slowdown in prices is expected to continue in the coming quarters”
- “Although in 2024 the decline will be slower due to upward base effects and the gradual withdrawal of fiscal measures adopted during the energy crisis”
And on policy ahead, he says the moves to higher rates so far have had a strong impact:
- “In addition to geopolitical developments, the transmission of monetary policy has been surprising us for its strength, which, if extended in the coming years, would translate into lower growth”
But nods to data dependency:
- “We’ll have to pay attention in the coming months to different developments that may condition the trajectory of inflation and, therefore, our monetary policy action”
- “The high level of uncertainty means that we must remain very vigilant to avoid both insufficient tightening, which would prevent the achievement of our inflation target, and excessive tightening, which would unnecessarily harm activity and employment”
EUR/USD update, it rose regardless:
