Interview with Luis de Guindos, Vice-President of the ECB, conducted by Emilio Ordiz and Jorge Millán

21 December 2023

Wage cost data in Spain point to an increase of 4.7%. ECB President Christine Lagarde stated that domestic inflation is resisting and is largely predicated by wages. Do you think wage moderation is required to beat inflation?

A year ago inflation was above 10% and now it is below 3%. Indicators of underlying inflation are also favourable, i.e. there is a clear downturn in inflation, basically because the supply and energy components that were having a negative impact have started to fade, and because monetary policy is taking effect. However, average wage growth in the euro area is over 5%, whereas productivity is barely improving. This means that unit labour costs are rising, which adds to inflationary pressures. In 2022 profit margins increased considerably, but this year the increase has been more moderate. This is partly due to firms absorbing some of the…