ECB’s Müller: ‘Interest Rates Are No Longer a Constraint on Economic Activity’

18 April 2025

By David Barwick – FRANKFURT (Econostream) – Official euro area interest rates are not holding back growth any longer, according to European Central Bank Governing Council member Madis Müller on Friday.

In a blog post on the website of the Estonian central bank, which he heads, Müller said that with Thursday’s 25bp rate cut by the ECB, ‘we can say even more clearly that interest rates are no longer a constraint on economic activity.’

It remained to be seen whether trade tensions would ultimately lead to supply chain disruptions and thus inflation, but fragmentation was generally inflationary, he suggested. Higher German government spending would support growth in the wider region, but could also produce price pressures, he said.

‘We will have to assess the above, as well as everything else affecting the Eurozone economy, at the next meetings of the Governing Council of the European Central Bank in order to decide on the future level of central bank interest rates’, he said.

The euro had ‘risen sharply’ versus the dollar recently, Müller observed. While this made imports less expensive, it was a headwind for exports, he said.

‘At the same time, the euro's appreciation reflects investors' confidence in the Eurozone economy’, he said. ‘At least compared to the US, whose credibility has suffered due to President Trump's erratic economic policies.’

Key indicators in the euro area had been moving ‘in the right direction’, he said, citing the slowdown of headline inflation.

‘It can be assumed that inflation will remain close to the central bank's target of 2% throughout the year’, he said. ‘The slowdown in price increases has been helped by falling energy prices: for example, the price of oil has fallen by almost 20% in four months.’