The Governor of Bank of Spain, Pablo Hernandez de Cos, indicated this Monday that the latest data from the labor market point to a slowdown in the employment creation and the most recent confidence indicators anticipate a “loss of dynamism” in activity and agent spending. Hernández de Cos pointed out that signs of a “slowdown” are already beginning to be seen in the main indicators of consumption and investment.
For this reason, the governor has highlighted that the information available points to a slowdown in the Spanish economy in the coming months, after the recovery experienced until the summer, in a context of “very high” uncertainty and escalating inflation, as a result of the invasion of Ukraine.
Likewise, it has reiterated that the convergence of the Spanish economy towards pre-pandemic levels is more delayed than in the euro area as a whole and remains “incomplete and heterogeneous” by sector. The governor has also anticipated that the increase in the price of energy anticipates “adjustments” in family spending, in a heterogeneous way by level of household income.
For Hernández de Cos, The income agreement is “crucial” to avoid an inflationary spiral, which would have potentially “very adverse” effects on activity and employment. Through this pact, he indicated, companies and workers would agree to share the loss of income for the national economy. Likewise, he has added that a suitable design of the pact would take into account the “asymmetric impact” of the current disturbances
between workers, companies and sectors and should be multi-annual.
The governor has pointed out that the inflationary tensions are explained, mainly, by factors of a global nature and affect the whole of the euro area. This has prompted the reaction of the ECB which, since December 2021, has begun the process of normalizing monetary policy.
“The Governing Council of BCE It will continue to take measures as long as the available information indicates that inflation could remain above the medium-term objective,” he stressed. Thus, she has pointed out that the increase in market reference interest rates is gradually being passed on to the cost of bank credit and, therefore, the criteria for granting bank loans have been tightened during the second quarter of the year.
Finally, he has appealed to the need to adopt economic policies that focus on supporting the most vulnerable, apply “decisive” reforms on the supply side, a firm commitment to fiscal sustainability and the reinforcement of the European project.