ECB’s Stournaras: ‘Considerable Scope’ for More Rate Cuts, Must Be Gradual

16 January 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Thursday said that there was much room to cut interest rates further but that easing should be approached carefully in view of elevated uncertainty.

In a speech at the at the Greek-French Chamber of Commerce and Industry in Athens, Stournaras, who heads the Bank of Greece, said that monetary policy remained restrictive and that ‘the news on the inflation front is very good’.

‘Looking ahead, the medium-term trend in inflation suggests that there is still considerable scope for further monetary policy easing’, he said, noting that price stability should be sustainably achieved in 2Q.

‘What concerns me, however, is growth’, he continued. ‘It seems that the euro area economy is struggling to regain its footing.’

Citing geopolitical risks and trade tensions, Stournaras suggested that the potential ‘negative consequences for the already very moderate growth rate of the euro area economy’ could lead to an undershooting of the ECB’s objective.

‘For these reasons, monetary policy easing should continue with a series of interest rate cuts at the next meetings of the ECB's Governing Council’, he argued. ‘However, due to increased uncertainty, our actions should be gradual and cautious and continue to be based on the available evidence.’

‘Of course, larger declines should not be ruled out if incoming data point to inflation below target over the medium term’, he said.