ECB’s Stournaras: ‘I Think 25BP Is an Optimal Reduction’ for December

18 November 2024

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Yannis Stournaras said on Monday that it was ‘reasonable’ to expect a 25bp cut in December, as this would be an ‘optimal reduction’.

In an on-stage conversation at a Bloomberg event, Stournaras, who heads the Bank of Greece, said that a 25bp cut at the next meeting was ‘more or less’ a done deal.

The ECB was still in restrictive territory and there was a long way to go until the neutral rate was reached, he said.

‘There’s going to be a number of cuts if nothing changes, [but] something might change’, he added.

Asked where the neutral rate was, Stournaras said that estimations suggested it was around 2% on average for the euro area.

If inflation kept decreasing as expected, the ECB’s interest rates could be close to 2% by the end of next year, he observed.

‘The baseline is that now inflation falls more rapidly than we thought in our September forecasts’, he said. ‘It seems we will achieve the 2% in a sustainable basis, 2% inflation, in the first or second quarter of 2025.’

Though unwilling to speculate about Trump’s future trade policies due to high uncertainty, Stournaras said that if tariffs were implemented, Europe’s economic activity and exports would weaken.

‘In the short term they [tariffs] are going to shoot up inflation, but also growth will be affected, trade will be curtailed, production will fall’, he said.

Tariffs would bring ‘stagflation’ to Europe in the short term, according to Stournaras, while the medium term would bring recession and deflation.