Bruce Kasman, managing director and chief economist at JP Morgan worldwide, has not come to Spain for years, since before the outbreak of the pandemic, when the world was different. During Covid-19, inflation began to take shape that would implode a year and a half later in the form of prices that grew by double digits, and that prompted central banks to break with more than a decade of interest rates at historically low levels. After a year and a half since the central bankers began their race for hunt to prices, Kasman believes that the Eurozone is in a better position than the US, where he gives a high probability of seeing a recession next year.
Ask. We just witnessed the first pause of the ECB in the escalation of rates after ten consecutive increases. Do you think it will be an exception or will it continue?
Answer. The ECB will maintain interest rates during this pause because, to begin with, the Eurozone economy will remain in the midst of the stagnation in which it has been moving since mid-2023. What is happening on the inflation side is encouraging, despite because we do not think it will return to the levels at which the ECB feels comfortable [en el 2%]we value positively that it is returning to areas close to 3% as has been seen since the summer.
Q. Is it realistic to maintain the ECB’s 2% inflation target in the medium term?
R. The region has basically halved its growth, but this moderate drop in demand is offset by a constant reduction in unemployment [se encuentra en mínimos históricos en la Eurozona, del 6,4%], which continues to put upward pressure on labor costs. And this leads us to think that inflation in the euro zone is subject to two opposing forces. Considering the base effect of energy prices in 2022 [con el precio del gas disparado por la guerra en Ucrania], inflationary pressures will tend to moderate. But it is true that to achieve that 2% objective, which is somewhat more complicated, we do not think it can be achieved without the economy falling into a more significant slowdown.