ECB’s Stournaras Repeats: See Terminal Rate of 2% Reached by 4Q 2025

17 March 2025

ECB’s Stournaras Repeats: See Terminal Rate of 2% Reached by 4Q 2025
Yannis Stournaras, governor of the Bank of Greece, at the European Central Bank Governing Council meeting in Ljubljana on October 17, 2024. Photo by Adrian Petty/ECB.

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Monday repeated his expectation that the ECB would hit the terminal rate of 2% by 4Q of this year.

In an on-stage interview at a conference in Athens, Stournaras, who heads the Bank of Greece, said, ‘So for 2025 the terminal interest rate, the markets predict that it will be 2%. That's what I predict. That is two more reductions. But I repeat the great uncertainty. We don't know what tomorrow will bring.’

It was too soon to say what the Council would decide in April, he said, declining to rule out a cut.

‘I'm not saying it should be in April, in June, but in 2025 I think the monetary policy rates, the key rate, the DFR will be 2%’, he said.

Stournaras observed that developments since the election of Donald Trump to US president had led to unanticipated circumstances.

‘What has now begun, two months after the election of the new president in the United States, are the threats of a trade war, the implementation of a trade war, the withdrawal from Europe regarding the military umbrella, or at least the threats’, he said. ‘This creates a new situation.’

‘Uncertainty has increased’, he continued. ‘Of course, the situation is not as predicted at the beginning, namely that we will have very high growth in the United States, that the dollar will appreciate. Quite the opposite.’

US inflation would rise as a result of the trade tensions and the new administration’s expulsion of migrants, he said.

‘And we have the first signs of recession in America.  which until a few months ago this was rather unheard of’, he said. ‘So we are going to a very big reversal of the situation. We still cannot know where we will end up, because every day different things are announced by America.’

European growth would be modestly lower than previously expected, he said, with inflation less changed.

‘That is, what we are seeing so far has not caused major reversals in inflation and is probably not predicted either’, he said. ‘That is, we predict, unless we have very large reversals with balancing tariffs from Europe of a very high level, that inflation will fall to 2% towards the end of 2025, perhaps early 2026, on a permanent basis.’