ECB’s Stournaras: Monetary Policy to ‘Continue to Be Restrictive for Some Time’

4 September 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Wednesday said that ECB monetary policy had to stay restrictive for a while but should not undercut growth.

In an opinion piece written for Greek business newspaper Imerisia, Stournaras, who heads the Bank of Greece, said that ECB monetary policy would ‘continue to be restrictive for some time’ and that financing conditions, though now ‘significantly more restrictive than they were at the beginning of the year’, would ‘remain restrictive even after several interest rate cuts.’

Monetary authorities faced a ‘dilemma’ in that they needed to maintain the disinflation process so as to hit the ECB’s price stability target by end-2025, but at the same time also needed to support growth so as to ensure full employment and avoid undershooting the inflation target, he said.

‘Indeed, in the June projections, inflation is expected to be below target throughout the quarters of 2026’, he pointed out.

Declining to speculate as to possible further monetary easing over the remainder of 2024, Stournaras said rate cuts were subject to developments and reiterated that policy would be tight for now in any event.

‘Along this path, monetary policy decisions should continue to be taken according to a gradual and flexible approach’, he said. ‘This is a crucial factor to mitigate unwanted economic volatility and risks to financial stability, while ensuring the effectiveness and proportionality of monetary policy measures and preserving our credibility.’

The ECB would ‘continue to tread cautiously and remain vigilant to adjust our monetary policy stance appropriately with gradual reductions in our interest rates, if necessary’, he said.

The winding down of asset purchases and the repayment of TLTROs would add to the tightness of financing conditions, he asserted.