ECB Insight: Stournaras, Meet Stournaras

18 June 2025

By David Barwick – FRANKFURT (Econostream) – Writing here on June 3, we expressed reluctance – hardly novel - to accept European Central Bank Governing Council member Yannis Stournaras’ contention that 2% would mark the terminal rate of the ECB’s easing cycle. With good reason: Stournaras himself now appears reluctant to accept it.

In an interview with Greek public broadcaster ERT aired Monday, the Bank of Greece governor declared that the ECB had `reached a first point of equilibrium` following its June 5 rate cut, but allowed that `we don’t know if this equilibrium will hold.` Asked whether another rate cut could be in store this year, he replied, `Possibly yes, possibly no.`

That ambivalence would hardly merit comment coming from most of his colleagues, especially given the ECB’s current approach to policymaking. From Stournaras, it represents a rhetorical retreat. Until very recently, he had been a singularly outspoken proponent of the view that 2% was likely to be as far as the ECB would go.

He stuck to that line through major fiscal developments in March and the spike in trade tensions in April. Even now, he seems reluctant to abandon the framework entirely. In his latest remarks, he noted that policy rates and inflation were both at 2%, implying a real ECB rate of zero. `According to the definition of the neutral interest rate,` he said, `we have reached a first point of balance.`

Still, gone is any insistence that this 2% point of balance is where policy will remain. Stournaras’ newly cautious openness to further cuts - while hedged with references to uncertainty and data dependence - stands in quiet contradiction to his more confident messaging of previous months.

In essence, Stournaras’ earlier insistence on a terminal rate of 2% increasingly resembles a form of buyer’s remorse. Having got what he thought he wanted, he now appears less convinced that it will suffice.

More broadly, his shift underscores an important reality about the state of the Governing Council: While July is off-limits for now - and whether the taboo on lobbying for a move weakens or not, a cut next month appears unlikely - there are policymakers who have by no means written off further easing thereafter.

That Stournaras now couches his outlook in conditionality reflects not just personal recalibration, but the fact that finality remains elusive in a data-driven regime navigating multiple crosscurrents.

It also illustrates the hazard of making definitive predictions in a framework that formally disclaims them. The ECB’s meeting-by-meeting, data-dependent approach sits uneasily with attempts to declare any level as final, and those who do so run the risk of having to row it back - sometimes sooner than expected.

Any sense of closure that accompanied the June 5 decision was illusory. Rather than having reached a stable plateau, underlying positions are far from settled.

Policymakers like Vice President Luis de Guindos continue to emphasise downside risks, and now even someone who previously drew a line under further action appears hesitant to stand behind it.

What Executive Board member Isabel Schnabel and a few others hoped would be the end may, in time, prove merely another waystation on a longer journey.