ECB’s Escrivá: Interest Rate Cuts to Continue Next Year

26 December 2024

By David Barwick – FRANKFURT (Econostream) – The European Central Bank will continue to ease monetary policy in 2025, when it will also succeed in restoring price stability, ECB Governing Council member José Luis Escrivá said Thursday.

In an opinion piece for Spanish digital newspaper El Independiente, Escrivá, who heads the Banco de España, said that the process of disinflation had ‘occurred in a context in which economic activity has shown some weakness, suggesting that the inflationary pressures experienced in previous years are now ruled out.’

All the same, the situation was characterised by high uncertainty, he said, with ongoing wars and the outcome of the US elections making it ‘very difficult to make precise predictions about the performance of the world economy next year.’

‘However, in the context of the stabilisation of inflation that we are experiencing in Europe, monetary policy should continue to ease, with further interest rate cuts’, he said. ‘This expectation is also based on the importance of supporting a gradual economic recovery, supported by an increase in domestic demand.’

Lower borrowing costs could spur domestic demand via spending and investment, ‘crucial for a sustained economic recovery’, he said.

Escrivá reiterated his expectation ‘that interest rate cuts will continue in 2025, when the 2% inflation target is expected to be consolidated.’