In an interview with Econostream Media, Luis de Guindos, Vice-President of the European Central Bank, said the euro area economy has proven more resilient than expected, with early 2026 growth likely to exceed projections and inflation steadily converging toward the ECB’s 2% target.
Headline inflation stands at 1.7%, while core inflation continues to ease. De Guindos stressed that the current interest rate level is appropriate, but the ECB remains open-minded and data-dependent, without providing forward guidance.
He highlighted geopolitical tensions, particularly developments involving Ukraine, the Middle East and Iran, as key downside risks. Increasing competition from China—both globally and within Europe—was also flagged as a concern, especially if trade diversion intensifies. However, he said risks to growth are broadly balanced, with potential upside coming from stronger consumer spending or more expansionary fiscal policies.
On inflation, de Guindos said recent data were in line with expectations, including lower energy prices and moderating services inflation. While markets are pricing in a first rate hike in the second half of 2027, he noted that expectations can shift quickly as circumstances change.
Regarding exchange rates, he emphasized that the ECB does not target the euro but monitors it closely. The recent movement of the EUR/USD rate back toward the 1.16–1.18 range is consistent with projections and not considered dramatic.
On fiscal policy, he underlined the importance of increased defence spending across Europe while maintaining fiscal consolidation to preserve sovereign bond market stability. He also welcomed the appointment of Kevin Warsh as Chair of the Federal Reserve, expressing confidence in his understanding of central bank independence.
Finally, de Guindos commented on succession at the ECB, welcoming Boris Vujčić as his successor and expressing hope for stronger gender balance in future Executive Board appointments.
