By Marta Vilar – SINTRA, Portugal (Econostream) – European Central Bank Vice President said on Tuesday that cutting interest rates one more time would not help the economy recover. 

In an interview with Bloomberg TV on the sidelines of the ECB Forum on Central Banking 2025 in Sintra, Portugal, de Guindos said that the ‘economy is not good’, that GDP data for Q1 had been an ‘illusion’ and that growth was likely to be closer to 0% in Q2 and Q3. 

‘But an additional cut is not going to help the economy improve’, he added. ‘What we need is certainty about trade policies, tariffs, fiscal policy… that’s the kind of reform we need in Europe to foster growth.’ 

The ECB’s approach was ‘quite clear’, according to de Guindos, who said that the central bank was now in a ‘good place’. 

De Guindos described the expected future evolution of inflation as ‘positive’ and said inflation was very close to the 2% target. 

‘The possibility of undershooting is not big, it is quite limited’, he said. 

However, geopolitical risks suggested that the ECB had to remain openminded with respect to future decisions, he said. 

Asked about the exchange rate, de Guindos said that the current level of the euro versus the US dollar was ‘perfectly acceptable according to our projections’. 

The ECB should seek to avoid ‘any sort of overshooting’ of the exchange rate, he said. 

The speed of the appreciation was more important to the ECB than its level, according to de Guindos.  

‘I think that 1.17 and 1.20 [EUR:USD] is something that we can overlook a little bit’, he said. ‘Something beyond that, it would be much more complicated, but 1.20 is perfectly acceptable.’ 

Undershooting was not part of the ECB’s baseline ‘at all’, and despite expecting readings below 2% for inflation in Q1 2026, inflation would again return to above 2% after that, he said. 

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