ECB’s Stournaras: ‘Monetary Conditions Remain Constrained’, to Gradually Become Less So

8 April 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Yannis Stournaras on Tuesday said that monetary conditions were still tight after six ECB rate cuts, due to the pass-through of previous tightening measures, but that they would gradually ease this year.

In a speech at the General Meeting of Shareholders of the Bank of Greece, which he heads, Stournaras said, ‘As a result [of the six rate cuts to date], financing conditions are gradually becoming more relaxed, as interest rate cuts have started to reduce borrowing costs for businesses and households.’

‘Overall, however, monetary conditions remain constrained, while the cost of servicing existing loans remains elevated, reflecting the impact of past interest rate hikes’, he said.

Over the course of the current year, monetary policy would ‘gradually’ grow less restrictive with continued easing, he said.

‘Inflation at the euro area level has now come significantly closer to the 2% target and the ECB's forecasts show that this trend is sustained and compatible with price stability’, he said.

‘In any case, the ECB remains cautious, pointing out that its decisions will continue to be based on the currently available data and the path of inflation, ensuring the smooth adjustment of the euro area economy to the new monetary reality’, he said.

Stournaras said the risks facing the global economy were heightening the uncertainty surrounding growth and inflation, mainly due to increased protectionism. The US tariffs announced on April 2 would interfere with global supply chains, he said.

‘These developments threaten the resilience of economies, restricting international trade and worsening international financial conditions and investment, while increasing the risk of new inflationary pressures and are expected to slow global growth’, he said.

Euro area monetary policymaking was more difficult due to the heterogeneity of growth and inflation outlooks across the region, he said.

‘A new resurgence in inflation or inflation expectations may slow down or even halt the process of monetary policy normalisation, worsening financial conditions and growth dynamics’, he said. ‘On the other hand, a prolonged restrictive direction puts pressure on vulnerable sectors of the economy.’

‘At the same time, geopolitical tensions, market volatility and rising bond yields in the euro area are making financial conditions even more constrained’, he continued.

Globally, monetary policy jurisdictions would become less synchronized, he said.

‘In this environment of increased complexity, maintaining the credibility of monetary policy requires flexibility and a readiness to readjust its stance in a timely manner in order to limit uncertainty and ensure macroeconomic stability’, he said.

Stournaras repeated the assertion that a trade conflict’s impact would ‘be negative for all the economies involved, including the US, as the latest data on the US economy and markets already confirm.’