Bloomberg – According to Edward Scicluna, a member of the European Central Bank’s governing body, the movement Eurozone consumers will save the economy from a hard landing.
A slowdown in the manufacturing sector, weak exports, high financial costs and Geopolitical uncertainty slows growth, costs stay the same, As citizens benefit from a resilient labor market and resume pre-pandemic lives, Malta’s central bank governor said in an interview.
“What’s really encouraging is that despite all these blows, post-Covid people actually want to eat” Scicluna said speaking at the International Monetary Fund meetings in the Moroccan city of Marrakesh. “Everybody is talking about the recession. But the thing is, people don’t like it.
The ECB predicts growth will resume next year after five quarters of virtually stagnant economies in the 20 countries. Much of that rebound is expected to be fueled by consumers, Generous pay deals will put more money in their pockets, as will lower inflation.
These dynamics have inspired some confidence in the IMF. Although its economists have revised downwards their euro zone growth forecasts for this year and next, they see a recovery in 2024.
Alfred Kammer, director of the IMF’s European department, told reporters on Friday that the region was at an inflection point, with consumers starting to regain purchasing power and fueling demand.
“There are certain circumstances that suppress the economy: high interest rates, industrial sluggishness, exports, etc., but despite them, there is still consumption.” Scicluna said. “I don’t see a hard landing.”
It is crucial that the ECB ensures that inflation moves towards its target as planned, to ensure that workers are fair when negotiating wages, he said.
“We have to be credible with the unions, which means we’re moving towards 2% by 2025,” Scicluna said. “They should be compensated for the past, but if they’re convinced that reaching 2% isn’t really a pipe dream, that’s reflected in their salary demands.”
After 10 consecutive interest rate hikes that took the deposit rate to a record 4%, the ECB has done enough for now, he argued.
“We have to be patient and see how inflation comes down” said. “We all agree that if there are disturbances that threaten our inflation path, we have to take action, but now, as we see, it is coming down. So let’s leave the categories as they are,” he said.
This also means “It’s a little early to start discussing when we’re going to reduce them.”he added.
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