ECB's Elderson: ‘When the Time Comes and We Look Back, We Will Be Able to See’

12 February 2025

By David Barwick – FRANKFURT (Econostream) - European Central Bank Executive Board member Frank Elderson on Wednesday avoided attempts to elicit from him any information directly touching on the outlook for coming monetary policy decisions, though he did acknowledge that inflation was converging to the ECB’s target.

Speaking in an MNI webcast mainly on longer-term climate transition-related issues, Elderson said that despite the euro area economy’s weaker-than-expected ending to 2024 and the continued weakness of growth, 2024 had been ‘a recovery year’ and monetary authorities ‘still subscribe to the view that the conditions [for recovery] remain in place’.

He declined to comment on market expectations of another three cuts by September, observing merely that ‘[w]e do not give any forward guidance’, but instead decided on a meeting-by-meeting, data-dependent basis.

‘When the time comes and we look back, we will be able to see’, he said.

‘There is high uncertainty, clearly’, he said. ‘We have a clear reaction function. We take it meeting by meeting. I think that it is fair to say that we are delivering on our price stability objective. We see, you know, a convergence to our target, as we want to see it. And you know, this is how we will go.’

The neutral rate was an ‘important concept to understand the likely long-run average interest rate’, he said.

‘But it’s not such a good guide to short-term policy decisions’, he said, due to shortcomings not only related to measurement and models, but also to the fact that the absence of major shocks assumed by the neutral rate was at odds with the current situation in which ‘we are constantly exposed to shocks.’