ECB’s Cipollone: Data Since December Don’t Suggest Major Shift in Course of Monetary Policy

6 February 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Piero Cipollone on Thursday said that the incoming information since the ECB’s December macroeconomic projections was more or less in line with the current direction of monetary policy.

In an interview with Reuters, Cipollone said inflation was clearly headed downwards ‘despite some small bumps’ and that both data and the models uniformly indicated a return to price stability this year.

Since the models incorporated market rate expectations, the convergence to the ECB’s inflation target was consistent with declining interest rates, he said.

‘Everything is of course contingent on the information at the time of the forecasts’, he said, observing that new forecasts would be available next month, along with more spot inflation data.

Pressed as to whether he was happy with the rate expectations reflected in the December forecasts, Cipollone said that these expectations were based on what was known at the time.

‘I am comfortable as long as that path takes us to the target in the medium term in a sustainable way’, he added.

As for the message of data received since then, ‘Overall, I think the direction is the same’, he said. ‘I don’t see huge changes in our view, except trade tensions. The overall understanding of where we are going is there, the fundamentals haven’t changed, so I do not expect a big change in direction.’

All the same, Cipollone did not want to make any predictions regarding March.

‘I don’t want to seem elusive, but the uncertainty is so high that anything can happen’, he said. ‘We all agree there is still room for adjusting rates downwards. But we need to be extremely careful.’

The ECB had a meeting-by-meeting, data-driven approach to monetary policy, he reminded. ‘I want to enter the meeting with an open mind, see the staff assessment and process incoming data’, he said.

Still, he said, ‘we also all agree that we are still in a restrictive territory.’

Echoing other Executive Board members’ recent comments, Cipollone called the neutral rate ‘a conceptual tool’ that ‘doesn’t have much bearing on policy, given the high uncertainty.’ Even if the range were narrowed down to between 1.75% and 2.25%, this band implied ‘two completely different monetary policies, if you are close to target’, he said.

The ECB was now ‘almost on target’, meaning less need for restrictiveness, he said. On the other hand, he said, a weaker-than-expected recovery ‘could prompt us to reassess our concept of restrictiveness.’

According to Cipollone, inflation risks were balanced and there was nothing to suggest the ECB would undershoot its target. Indeed, recent developments, in particular with regard to energy, warranted prudence, he said.

‘might be a transitory phenomenon, but prices have risen substantially’, he said. ‘Consumer expectations have also gone up a little as they are very reactive to short-term developments.’

‘I’m not saying that risks are moving towards being on the upside, but we have no evidence of undershooting either’, he added.