ECB Vice-President discusses inflation, energy shocks, and monetary policy outlook

On May 7, 2026, Luis de Guindos, Vice-President of the European Central Bank (ECB), conducted an interview with the Financial Times. He discussed the differences between the current energy price shock and the 2021-22 inflation surge, emphasizing that interest rates are now positive, and the ECB is in quantitative tightening mode.

De Guindos highlighted that the inflation risk is lower now compared to 2021-22, citing delayed policy responses and academic debates as factors for late action previously. He stressed the importance of timely decision-making based on data rather than prolonged academic discussions.

Regarding upcoming interest rate decisions, he emphasized patience and prudence, awaiting further data and clarity on geopolitical conflicts, notably in Iran. He noted that energy shocks impact inflation faster than growth indicators and warned about potential weaker demand and activity.

De Guindos observed that financial markets have responded calmly to the conflict, which is positive, as it prevents amplified impacts on asset prices. He also assessed that second-round effects of rising energy prices are currently stable, with no significant wage increases or inflation expectations, though risks remain if conflicts persist.

The Vice-President discussed the importance of institutional unity within the ECB, praising President Lagarde’s efforts to foster consensus among the 27 Governing Council members. He noted that a united front is crucial for effective decision-making in a diverse monetary union.

He expressed concerns about fiscal constraints in the euro area, warning that limited fiscal space and political challenges could lead to rising yields and widening spreads, potentially tightening financing conditions. He clarified that the ECB has not discussed activating the Transmission Protection Instrument but considers it well-defined and unlikely to be used soon.

De Guindos commented on Germany’s economic challenges, emphasizing the need for reforms in energy and banking sectors, and supporting cross-border banking consolidation. He defended the recent opposition to UniCredit’s acquisition of Commerzbank as undermining the single market principles.

Regarding Spain, he attributed recent strong economic performance to reforms and migration-driven population growth but pointed out issues in rental supply and productivity that need addressing. He concluded with a reflection on the importance of central banks maintaining practical judgment and staying connected with real-world economic conditions.