ECB’s de Guindos singles out services as top inflation worry

By Joan Faus

BARCELONA (Reuters) – European Central Bank Vice President Luis de Guindos on Thursday singled out the rising price of services as his top concern in the ECB’s fight against inflation, saying they were being driven up by higher wages.

Inflation in the euro zone has fallen from record levels, but the price of services, which range from flight tickets to haircuts, are still rising strongly.

“What worries me the most in the underlying inflation trend is the trend in service prices,” de Guindos said at an event in Barcelona.

“Momentum in services… is rising. There’s demand and that’s because salary increases are accelerating.”

The ECB raised interest rates for a seventh straight time last week, albeit at a reduced pace, and hinted at more hikes.

Markets expect a fresh, 25-basis-point increase at the ECB’s June meeting and possibly one more by the end of the summer, followed by rate cuts starting early next year.

De Guindos said it was too early to say how many more times the ECB would raise its interest rates as this would mainly depend on the reaction to increases in borrowing costs.

“Don’t believe anybody who tells you what the terminal rate is going to be,” de Guindos said.

“I don’t feel comfortable or uncomfortable (about current investor expectations) but markets can be wrong about this.”

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