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Euro-Area Growth Outlook Faces Downside Risks
European Central Bank Vice President Luis de Guindos said there are risks to the current growth outlook and that the euro-area economy may perform worse than currently expected.
Governing Council member Pablo Hernandez de Cos told the same event a few hours later that there’s the possibility of a recession in the euro zone.
The central bank is widely expected to have reached the peak of its tightening cycle even though officials haven’t ruled out that more hiking might be necessary to get inflation under control. President Christine Lagarde said earlier on Friday that officials can now “observe very attentively” how the economy reacts to the 450 basis points of rate increases enacted since mid-2022.
Business surveys by S&P Global this week revealed sluggish euro-area growth in November, though price pressures also remained high — leaving in the ECB in an uncomfortable spot. Investors currently expect a first rate cut as soon as April, though most officials have refused to engage in discussions on when borrowing costs can be lowered.
Guindos only reiterated that rates at the current level — if maintained for long enough — will allow inflation to return to the institution’s 2% price goal.
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