ECB’s Stournaras: Difficult to Say Exactly How Long Interest Rates Must Stay Restrictive

24 January 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Wednesday said it was hard to predict for how long monetary policy in the euro area would need to remain restrictive.

In an interview with Greek news portal, Stournaras, who heads the Bank of Greece, said, ‘In order for the ECB to start tapering interest rates, inflation needs to follow a clear and relatively stable path of convergence towards the medium-term target of 2%.’

The decline of inflation so far is ‘encouraging’, even if for the moment inflation will continue to exceed the price stability target, he said.

‘Thus, I estimate that policy rates will remain at sufficiently restrictive levels for some period of time, which is difficult to determine precisely’, he said.

The impact of ECB decisions was ‘highly visible in the rapid deceleration of inflation’, he said. However, uncertainty was high.

‘Decisions by the ECB's Governing Council will continue to take into account the latest available data, and interest rates can start to be cut when inflation is seen to be converging steadily towards 2% over the medium term’, he said.