ECB’s Stournaras: Don’t Expect First Rate Cut Until Mid-2024; April ‘a Bit Optimistic’

29 November 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Wednesday predicted a first rate cut at the mid-2024 mark, conditional on inflation cooperating.

In an interview with Politico, Stournaras, who heads the Bank of Greece, said, ‘The current numbers betting on April [for a first rate cut] seem a bit optimistic.’

Rather, he said, the first cut would come ‘in the middle of next year’, assuming inflation then at slightly below 3% and expectations of a decline to 2%.

‘She [Lagarde] said we cannot reduce interest rates in the next two quarters’, he said, according to Politico. This ‘means in the beginning of the third quarter of next year, we might. That’s how I read it.’

Stournaras expressed opposition to bringing forward the end of PEPP reinvestments, currently to last until end-2024 at least, according to forward guidance. Accelerating the end of these ‘would break a commitment — that could affect our credibility and, therefore, the effectiveness of our policies’, he said.

The negative economic scenarios of a year and a half ago failed to materialise, he said.

‘The numbers are not impressive as far as growth is concerned but … inflation is falling, inflation expectations are anchored around 2% and so far, signs of second-round effects are contained’, he said. ‘So far, so good.’