ECB Pre-Meeting Comment Recap: April Cut Uncertain, Views Diverging More Clearly

3 March 2025

ECB Pre-Meeting Comment Recap: April Cut Uncertain, Views Diverging More Clearly
The press conference room at the European Central Bank building in Frankfurt. Photo by the ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – Following is a collection of views expressed by ECB Governing Council members on various topics of high relevance related to this week’s meeting and the further evolution of monetary policy.

March cut

A 25bp cut seems the most likely outcome for March, with Bank of Lithuania Governor Gediminas Šimkus being the most outspoken about it.

  • 18 February – Šimkus: Do not see ‘any good reason not to do another rate cut in March’ – Econostream interview

 

April: to cut or not to cut?

April is the first monetary policy meeting since October 2024 where expectations for a rate cut become much less certain:

  • 24 February – National Bank of Belgium Governor Pierre Wunsch: ‘I’m not pleading for a pause in April, but we must not sleepwalk to 2% without thinking about it … Let’s keep it open’ - Interview
  • 23 February – Banco de España Governor José Luis Escrivá: ‘No, I'm not saying that [the ECB should start discussing about holding rates]. I say you have to be cautious’. – Interview
  • 19 February – Executive Board member Isabel Schnabel: ‘But an April rate cut is no longer fully priced in. So, markets are not entirely sure either.’ – Interview
  • 19 February – Schnabel: ‘If anything, we are getting closer to the point where we may have to pause or halt our rate cuts … I don’t know what’s going to happen in the next meetings, so let’s see. But we need to start that discussion.’ – Interview
  • 18 February – Šimkus: ‘So, the direction of travel is clear, even if the high uncertainty forces me to be more cautious about our decisions in April and June.’ – Econostream interview
  • 12 February – Bundesbank President Joachim Nagel: ‘The closer we get to the neutral rate, the more appropriate it becomes to take a gradual approach.’ – Speech

 

Market expectations

Despite some policymakers’ increasing unwillingness to commit to future cuts, others still endorse a specific rate path under the disguise of describing it as ‘reasonable’ or something they are ‘comfortable’ with.

  • 24 February – Wunsch: ‘Relatively comfortable’ with the market expectations that interest rates would reach 2% by year end, ‘give or take 50bp’. – Interview
  • 18 February – Šimkus: ‘I agree with market expectations that there might be another three cuts between now and the end of 2025’ – Econostream interview
  • 13 February – Croatian National Bank Governor Boris Vujčić: Market expectations of three more cuts ‘not unreasonable’ but ‘need to see a slowdown in core inflation and a slowdown in services inflation’. – Interview
  • 7 February – Chief Economist Philip Lane: ‘So even if the market is pricing several cuts, you know, I am not saying there’s any reason not to have that market view. From a policy point of view our emphasis is really on agility.’ – Podcast
  • 6 February – Executive Board member Piero Cipollone: ‘I am comfortable [with market expectations] as long as that path takes us to the target in the medium term in a sustainable way.’ – Interview

 

‘Direction is clear’

A handful of Governing Council members have repeated this mantra as of late, with Schnabel the only one explicitly expressing opposition to it.

  • Šimkus (18 February, Econostream interview), Cipollone (18 February, speech), Vice President Luis de Guindos (10 February, interview), Banco de Portugal Governor Mário Centeno (5 February, interview), and Banque de France Governor François Villeroy de Galhau (31 January, speech) have used this sentence lately.
  • 19 February – Schnabel: ‘At the time when it was still relatively clear that monetary policy was restrictive, one could infer the direction of travel from that. But this is no longer the case. And therefore, for me, the direction of travel is not so clear anymore.’ – Interview

 

Neutral and terminal rate

Most governors refuse to think of the neutral rate as a destination and try to avoid predictions about this or the terminal rate. However, some like Villeroy and Bank of Greece Governor Yannis Stournaras have dared to publicly announce their estimations, while Nagel has urged his colleagues not to.

 

  • 25 February – Nagel: ‘There’s nothing to be gained from publicly speculating on where we might stand, in terms of our interest rate policy, in the summer or at the end of the year.’ – Press conference
  • 25 February – Stournaras: ‘[G]iven the information we currently have, I expect that interest rates will reach 2% by the autumn of this year and that this is likely to be the terminal rate.’ – Interview
  • 22 February – Villeroy: – ‘From today's point of view, we could be at 2% next summer … It would be a mistake to determine today the direction we would take after the summer.’ – Interview
  • 18 February – Šimkus: ‘I don’t see any good reason for policy to stay anywhere far from the interval I described as nominal neutral, which is around 2%. Policy needs to return to this interval around 2%.’ - Econostream interview
  • 5 February – Centeno: ‘We may need to go below neutral’ – Interview

 

Are rates no longer restrictive?

Language on restrictiveness has been a clear source of disagreement prior to the March meeting, and if we rely on policymakers’ public comments, the extent to which it might be modified remains uncertain.

  • 25 February – Stournaras: ‘We are definitely still in restrictive territory’ – Interview
  • 25 February – Nagel: ‘And perhaps I will end up sometime with the conclusion that we’re no longer tight. But from today’s perspective, I cannot say that.’ – Press conference
  • 19 February – Schnabel: ‘I’m not saying our monetary policy is no longer restrictive. What I'm saying is I’m no longer sure whether it is still restrictive … That is a discussion we should have in the next meeting.’ - Interview
  • 18 February – Šimkus: ‘[A]fter March we will still be in restrictive territory … I wouldn’t mind keeping the language. It would better reflect reality to keep it. But there are arguments going the other way, so maybe this will be the time to drop it.’ - Econostream interview
  • 17 February – Holzmann: Below 2.5% there would be ‘even less question that we are no longer restrictive, and given all the uncertainty, I would be very cautious’ – Econostream interview
  • 15 February – Banca d’Italia Governor Fabio Panetta: ‘Investments are also slowing down, due to worsening growth prospects and the still restrictive tone of financial conditions.’ - Speech 
  • 13 February – Vujčić: ‘This [conditions no longer being restrictive and, therefore, having to start a discussion about removing the reference to restrictiveness] could already happen at our next meeting, but it will also depend on the incoming data.’ – Interview

 

Inflation

Most Governing Council members are satisfied with the downward trend of inflation, with one policymaker seeing it reaching 2% later than expected and starting to warn about upside risks potentially winning over downside risks. Others believe the weak economy could pose a threat to inflation.

  • 25 February – Nagel: ‘Overall, then, the outlook for prices is fairly encouraging. However, the persistently elevated core inflation and the undiminished strength of services inflation warrant a degree of caution. This is especially true in light of the latest developments on the inflation front.’ – Press conference
  • 24 February – Wunsch: ‘Relatively relaxed about the inflation outlook’ – Interview
  • 20 February – Stournaras: ‘What I find particularly encouraging is the fact that core inflation is at the moment a bit lower than we had expected in our latest projections … And this means that the past monetary policy tightening has done its job in taming inflation.’ – Speech
  • 19 February – Schnabel: ‘In general, I see risks to our inflation outlook as somewhat skewed to the upside. So, I would not exclude that inflation comes back to 2% later than we had anticipated. But that remains to be seen.’ - Interview 
  • 17 February – Holzmann: ‘We saw quite a substantial deviation in January, and we have to expect that such negative surprises con be repeated.’ – Econostream interview
  • 15 February – Panetta: ‘Overall, there are reasons to assume that inflation will settle at 2% over the medium term, in line with the latest Eurosystem staff projections’ – Speech
  • 15 February – Panetta: ‘At present, the main downside risk to inflation is weak economic activity’ – Speech
  • 10 February – President Christine Lagarde: ‘Inflation is set to return to our 2% medium-term target in the course of this year, with risks on both the upside and the downside.’ – Parliamentary hearing  
  • 6 February – Cipollone: ‘We have to take care of the cost component and avoid being unduly restrictive. Our goal should be to have the economy growing close to potential and to contribute to reducing uncertainty as much as possible.’ – Interview
  • 5 February – Lane: ‘An excessive abundance of caution in monetary easing could threaten the recovery in domestic demand that is needed to support the pricing environment needed to deliver 2% inflation.’ – Speech