ECB’s De Guindos Mentions Higher Rates, While Inflation Ticks Lower

The ECB looking at higher rates, despite inflation remaining subdued

Written by: Skerdian Meta • Wednesday, May 19, 2021 • 2 min read

• Last updated: Wednesday, May 19, 2021

Headline CPI remained unchanged at 1.6% in April

Inflation has been improving everywhere, with the increase in crude Oil prices since this time last year. In Europe the CPI (consumer price index) inflation has also been improving, but it is still behind the US, where inflation jumped above 4% on an annualized basis last month. In the Eurozone inflation is staying below 2%, while core inflation is much lower and it ticked even lower today.

Although, the ECB vice president Louis de Guindos mentioned higher interest rates, if the economy keeps improving. This is way ahead of the FED, considering that the US economy is at a much better place. EUR/USD has turned down today, trading around 1.21 now.

Latest data released by Eurostat – 19 May 2021

April final CPI YoY +1.6% vs +1.6% prelim
Core CPI YoY +0.7% vs +0.8% prelim

No change to the headline estimate but the core reading is revised a touch lower, so that will at least continue to reaffirm the ECB’s take that actual inflation isn’t quite taking off yet in the region.

Remarks by ECB vice president, Luis de Guindos

The present levels of yields are favourable
Momentum of vaccination campaign key in recovery
Crypto volatility not posing risk to overall financial stability
If there is an unwarranted rise in yields, we will act
If there is a recovery, yields will go up
We’re going to see positive growth in Q2

The ECB is certainly looking more sanguine about bond market conditions as of late, even if yields are threatening higher as pointed out earlier. If real yields continue to climb though, that will certainly pose a problem to the central bank but for now, a problem deferred is a problem out of mind.

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.