Recession alone will not overcome euro zone inflation.

© Reuters FILE PHOTO: European Central Bank Vice President Luis de Guindos makes a statement during the second day of the regular meeting of EU economic and monetary affairs ministers in Berlin, Germany, September 12, 2020. Odd Anderson / Pool by

COLOGNE, Germany (Reuters) – The euro zone could be hit by a winter slump as concerns over the outlook for growth grow, but even that will not be enough to reduce inflation without further rate hikes, European Central Bank Vice President Luis de Guindos said. Wednesday.

Growth is suffering due to high energy costs and the loss of Russian gas, raising the risk of power outages in the winter when households and businesses take a financial hit from high costs.

“Markets believe that the economic slowdown will itself reduce inflation,” de Guindos said at the conference. “Actually, this… is not right. Monetary policy should contribute.”

The ECB has promised at each of its upcoming meetings and markets to raise the deposit rate above 2.5% next spring, jumping from the current level of 0.75%.

De Guindos added that the latest economic data points to a significant slowdown in the economy and that the ECB’s forecast of a slowdown in growth in the winter months has shifted to the downside.

Inflation is currently “very, very” high, de Guindos said, and the prolongation of Russia’s war in Ukraine has kept this rate uncomfortably long.

Inflation rose 9.1% last month and is seen to inch higher in the coming months before slowing, still keeping it above the ECB’s 2% target until 2024.

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