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(Bloomberg) — The European Central Bank is confident that inflation will converge to its 2% target next year, even as some questions remain about price pressures in the services sector, according to Vice President Luis de Guindos.
At the same time, the economy has disappointed recently as consumption remains weak, Guindos said during a panel in Madrid.
“A summary is that we have good news on inflation, and on growth we have not very good news,” Guindos said. “The main question mark we have, something we need to analyze more, is why this is happening, why growth is so fragile. A key factor behind this is the evolution of consumption.”
The ECB has cut interest rates three times since June, as inflation falls and the euro economies of twenty countries cool. Another cut is widely expected next month, when policymakers will receive updated projections that will help them assess the bloc’s prospects.
“The question mark is inflation in the services sector,” Guindos said. “It has to do with the evolution of wage dynamics, but also with productivity.”
Wages have risen sharply in response to inflation. While policymakers expect profits to moderate, they have argued that consumption should benefit as consumer price pressures ease.
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