The governor of the Bank of Spain, José Luis Escrivá, warned this Monday that the recent trajectory of inflation "is worrying because of the persistence of the rise in energy prices".
He made these statements at the World in Progress (WIP) congress, which is taking place at the Palau de Congressos de Catalunya, in Barcelona, until this Tuesday, in a colloquium in which he shared the stage with the former vice president of the European Central Bank (ECB), Luis de Guindos, and the governor of the Bank of France, Emmanuel Moulin.
Escrivá stressed that the concern centers on the persistent nature of inflation, which can indirectly spread to other goods and services intensive in energy consumption and generate second-round effects in wage negotiations to maintain purchasing power.
Moderate impact and European context
Moulin pointed out that, for the moment, the impact of inflation has been "moderate" and emphasized that the ECB opted not to raise interest rates at the October meeting, taking into account the effect of the two previous hikes and the strengthening of financial conditions in the euro zone.
"Obviously we are following the situation permanently" said Moulin, who insisted that the current inflationary episode differs from that of 2021 and 2022, when very high demand and a very strained labor market coincided.
De Guindos indicated that the 'shock' economies are facing now is a global supply shock "and this is the worst thing that can happen to central banks", since it slows growth and, at the same time, pushes prices upward.
Nevertheless, he highlighted that the European economy continues to post positive growth rates and that, despite inflation and the tightening of monetary policy, it has not entered recession.
France, debt and fiscal credibility
When asked about the macroeconomic situation of France, Moulin admitted that it generates "some concern", something that is reflected in the increase in the cost of financing French debt. Even so, he recalled that the President of the Republic can bring forward budgets through 2027 aimed at reducing the deficit even without a parliamentary majority, so he suggested that the markets may have overreacted.
Escrivá has broadened the perspective and has warned that "at some point the markets may begin to have doubts about the sustainability" of the debt of the major economies in the medium term, so he has called for States to have fiscal frameworks that strengthen confidence.
De Guindos has emphasized that "fiscal credibility is key, especially in an environment of rising interest rates," and has added that, in a context in which Europe is forced to increase defense spending, that credibility is even more decisive.
Balance of Lagarde's departure from the ECB
Regarding the departure of the until now president of the ECB, Christine Lagarde, the three participants have agreed that she has practically completed the entirety of her term.
They have recalled that Lagarde herself has explained that she is leaving the post for personal reasons and not political ones, and they have highlighted her management at the head of the central bank during the pandemic and in the subsequent phase of high inflation.