Interview with Luis de Guindos, Vice-President of the ECB, conducted by Isabella Bufacchi

14 May 2023

With seven hikes in one year, the ECB has raised interest rates at a very rapid pace, by a total of 375 basis points, to bring inflation back to its 2% medium-term target. This unprecedented monetary policy tightening has come after many years of low rates, and at the same time as Russia’s invasion of Ukraine has brought war to Europe, as well as the energy crisis and the risk of recession. Beyond just price stability, does the ECB take into consideration the impact of this monetary policy tightening on banks and financial stability?

Our mandate is price stability and tightened monetary policy is a response to the very high inflation we face. This has fallen from the 10.8% we saw in October last year, but it remains high. Still, despite the very strong tightening cycle, we have not seen any financial stability problems. Yields on government bonds have increased, but spreads have…