Luis de Guindos, Vice President of the European Central Bank, said that the bank has a “perception” that the recent crisis in the banking sector may lead to a decline in growth and inflation rates.
De Guindos explained – in an interview with the “Business Post” newspaper published on the website of the European Central Bank – that their perception of the crisis “is that it will lead to an additional tightening of credit standards in the euro area. Perhaps this will find its way to the economy, and lead to a decline in growth and a decrease in inflation.” “.
He said that the banking sector “is facing a period of great uncertainty”, as the approach to interest rate policy is determined at each meeting separately, without prior commitment to a specific action.
“The question now is how events in the US banking system and Credit Suisse will affect the eurozone economy,” the Spanish banker added.
The European Central Bank raised interest rates by 50 basis points to reach 3.5%, adhering to its policy of combating high inflation, despite the turmoil in global financial markets due to the bankruptcy of some US banks.
This is the sixth consecutive rate hike in the eurozone. The ECB is the first major central bank to issue a monetary decision since the collapse of Silicon Valley Bank (Silicon Valley SVB) and two other regional US banks, which raised fears of a repeat of the 2008 financial crisis.
Although the European Central Bank has lowered its inflation forecasts, the figures still indicate that price growth remains above its 2% target for years to come, indicating the possibility of a prolonged period of tightening.