ECB vice-president warns of Eurozone downturn
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The news: The euro-area could continue to struggle this year, after indications point to an economic contraction during December, ECB vice-president Luis de Guindos said in a speech on Wednesday.
The numbers: Euro area annual inflation reached 2.9% during December, up from 2.4% in November. The ECB’s target rate for inflation is 2% over the medium term.
The context: de Guindos explained that “soft indicators point to an economic contraction in December[…]confirming the possibility of a technical recession in the second half of 2023 and weak prospects for the near term.”
He added that the “rapid pace of disinflation” that was seen in 2023 is likely to slow during 2024, with a temporary pause at the beginning of the year.
The speech outlined that while the labour market continues to show resilience, December's slowdown in activity appears to have been broad-based, with construction and manufacturing in particular to have been affected.
Earlier this week, Governing Council member Francois Villeroy de Galhau assured the market that the ECB will cut rates at some point during 2024.
The source: ECB Speech
