De Cos believes fiscal policy for 2024 should be “very restrictive” across the eurozone

Madrid, September 25 (European Press) –

The Governor of the Bank of Spain, Pablo Hernandez de Cos, believes that fiscal policy for 2024 should be “very restrictive” across the eurozone, and believes that with energy prices falling, governments should reduce support measures.

During his participation in the 15th annual meeting of the International Forum of Sovereign Wealth Funds (IFSWF), organized by CovidIS, the governor stressed that “with the decline in energy prices, governments must reduce energy support measures.”

In any case, Hernandez de Cos suggested that if a new energy crisis makes new fiscal support measures necessary, they will need to be “much more selective.” In addition, he believes that the authorities should also undertake structural reforms to strengthen the supply side.

During his speech, the governor stressed that “this is necessary to avoid additional pressure on prices, which may require a more aggressive monetary policy response.”

According to Hernandez de Cos, the current level of the ECB’s official interest rates, which will be maintained for a sufficiently long period, will generally be consistent with achieving the 2% inflation target in the medium term.

“If we keep interest rates at these levels for a long enough period, there is a good chance that we can reach our 2% target within a reasonable period of time,” the governor of the Bank of Spain said.

This also coincides with the opinion of the majority of analysts and financial markets, who expect a rapid decline in inflation throughout the current year and next year.

Despite this, Hernandez de Cos warned that these statements are made on the basis of current information, pointing out that the level of uncertainty about the future development of the economy remains high and is subject to geopolitical risks that are difficult to track. To prophesy.

In this context, De Cos stressed that future decisions will ensure that the official interest rates of the European Central Bank are set at sufficiently restrictive levels as long as this is necessary.

“This approach is particularly important to avoid insufficient tightening, which would prevent achieving the inflation target, and excessive tightening, which would unnecessarily hurt economic activity and employment,” he defended.