Euro zone facing weak growth, possible recession

FRANKFURT: Reuters, Cairo Post, Rasha Mahmoud

The euro zone may have been in recession last quarter and prospects remain weak, European Central Bank Vice President Luis de Guindos said on Wednesday, adding that the recent rapid slowdown in inflation is likely to take a pause now.

Euro zone growth has been hovering on either size of zero for most of 2023 and only a mild pick up is seen this year, helping to cool inflation, which has overshot the ECB’s target for years and forced policymakers to raise interest rates to record highs last year.

On policy, de Guindos offered no new message, merely repeating the ECB’s guidance that a 4% deposit rate, maintained for a “sufficiently long duration”, will help cut price growth back to the ECB’s 2% target.

Investors see at least five rate cuts this year with the first move coming in March or April, a timeline several policymakers have called excessive given lingering price pressures.

Inflation fell rapidly through most of 2023 but jumped back to 2.9% last month, mostly on technical factors, and may hold around this level for some time.