ECB Vice President Luis de Guindos said in an interview, “we will continue raising rates to a level that ensures inflation will come back into line with our definition of price stability”. The level will depend on ” data that we receive, the evolution of inflation, economic conditions, demand, and energy prices.”
He expected inflation to hover around its present level of 10.7% “hover the next few months”. Inflation will then “start to decline in the first half of next year”. Quarterly GDP growth in Q4 will be “negative”, and to continue in Q1. This “technical recession” is not expected to be “very profound”.
On the topic of quantitative tightening, de Guindos said ECB will start it “sooner or later, for sure in 2023”. It must be implemented with “a lot prudence”. He expects to start with a “passive QT by not fully reinvesting the maturing securities in our portfolio.”. The “characteristics and the timing” of QT will be discussed in December. QT may overlap or not with normalization of interest rates.
