ECB Insight: Waiting for September – No Slam Dunk Yet Either Way

4 July 2025

ECB Insight: Waiting for September – No Slam Dunk Yet Either Way

By David Barwick – FRANKFURT (Econostream) – Today, we undertake another member-by-member review of the European Central Bank Governing Council, this time with respect to the likelihood of support for a rate cut in September.

We exclude the July meeting, as there is effectively no anticipation of a move then; only an unforeseen and substantial shock could realistically shift expectations.

We hardly need to point out that this exercise is highly interpretive and the result very tentative. Under the ECB’s data-dependent, meeting-by-meeting approach to policymaking, most or all Council members, if queried directly about their plans for a meeting 69 days hence, would naturally declare themselves ‘undecided’.

Nonetheless, it is readily apparent that Governing Council members currently span a spectrum of willingness to cut again. Of course, our tally is valid as of today, and no one can exclude events over the next 10 weeks that would lead to changes of heart in one direction or the other.

For now, our review suggests that nine Council members may need especially strong justification for a cut on 11 September. There are seven members whose stance remains too ambiguous to call either way, and nine already seem disposed to cut.

The total is 25 rather than 26 because Slovenia still lacks a central bank governor.

Likely to want to cut in September:

Banco de Portugal Governor Mário Centeno (his term of office ends on July 19, but it is not official that he won’t be reappointed):

  • 22 June 2025: ‘Supply and demand conditions are still too weak to allow a return to the target without further stimulus.’

Banque de France Governor François Villeroy de Galhau:

  • 24 June 2025: ‘[I]nflation expectations remain moderate and we have seen a significant appreciation of the euro which compensates for the appreciation of the oil price. If that was confirmed, it could possibly lead in the next six months to a further accommodation.’

Bank of Finland Governor Olli Rehn:

  • 02 July 2025: ‘[O]ur own projection is indicating that inflation is likely to be below target for 18 months. And we have to make sure that that will not become persistent and become embedded into inflation expectations. … I am quite concerned about inflation being below target for an extended period of time. We have to stay vigilant and we have to be alert and act with agility as needed and if needed.’

Banca d’Italia Governor Fabio Panetta:

  • 18 June 2025: ‘The Eurosystem projections for the coming months point to inflation remaining well below the 2% target for a prolonged period, accompanied by weak output dynamics.’

Bank of Greece Governor Yannis Stournaras:

  • 16 June 2025: ‘Of course, if the economy, the European economy weakens further, if inflation decreases further, that is, below the target, which we do not want, we may proceed with new reductions…’

 

Leaning toward a September cut:

ECB Vice President Luis de Guindos:

  • 01 July 2025: ‘The economy is not good … risks are clearly tilted to the downside … investment is flat … consumption is not recovering. … Tariffs are going to reduce domestic demand and aggregate demand … the drop in demand will more than compensate the initial increase in the price of imported goods.’

National Bank of Belgium Governor Pierre Wunsch:

  • 30 June 2025: ‘We have only one objective, which is inflation, but if growth would remain on the downside, then there might be room for a little bit more action.’

Latvijas Banka Governor Mārtiņš Kazāks:

  • 01 July 2025: ‘It’s more about signalling and fine-tuning. It could also be an insurance cut, to ensure that inflation moves back to 2% after falling short in early 2026.’

Bank of Spain Governor José Luis Escrivá:

  • 08 June 2025: ‘When the situation is fraught with uncertainty, it's wise to keep all options open. The central scenario we're operating with - GDP growth around 1%, inflation at 2% - could require, if it is confirmed, some fine-tuning.’

 

Too unclear to call:

ECB President Christine Lagarde:

  • 01 July 2025: ‘I'm not saying mission accomplished, but I say target reached.’

ECB Chief Economist Philip Lane:

  • 01 July 2025: ‘We do think the last cycle is done, so bringing inflation down from the peak of 10[%], back to 2%, that element is over, but on a forward-looking basis we do have to stand ready to make sure that any deviation we see does not become embedded, does not change the medium-term picture.’

Central Bank of Cyprus Governor Christodoulos Patsalides:

  • 12 June 2025: ‘Our approach as the Governing Council is flexible and agile and under the current conditions of high uncertainty will continue to be based on the assessment of the latest economic data and developments at each meeting with a view to shaping the appropriate monetary policy stance.’

Bank of Lithuania Governor Gediminas Šimkus:

  • 30 June 2025: ‘Nothing has fundamentally changed since June. The September projections may be fairly similar to June‘s, maybe except the euro is even stronger.’

Central Bank of Ireland Governor Gabriel Makhlouf

ECB Executive Board member Piero Cipollone

ECB Executive Board member Frank Elderson

 

Leaning away from a September cut:

Deutsche Bundesbank President Joachim Nagel:

Croatian National Bank Governor Boris Vujčić:

  • 10 June 2025: ‘We feel that we are now in a very good position. It’s worth now waiting to get more data and in my view, to get another projection before we decide where we want to go and hopefully by that time get more clarity on the on the trade relationships.’

National Bank of Slovakia Governor Peter Kažimír:

  • 24 June 2025: personally, I would not touch rates until we have much more clarity with respect to the scenarios of the trade wars.

Eesti Pank Governor Madis Müller:

  • 01 July 2025: ‘For the moment it’s not obvious to me that we need to go into expansionary territory. Growth is weak, but it’s still gradually picking up. So, it’s quite reasonable for now to keep rates where they are and to monitor further developments - also as the level of rates is low enough and not holding back the recovery.’

Central Bank of Malta Acting Governor Alexander Demarco:

De Nederlandsche Bank President Olaf Sleijpen (Sleijpen is expected to share the broadly hawkish stance of his predecessor, Klaas Knot)

Central Bank of Luxembourg Governor Gaston Reinesch

Austrian National Bank Governor Robert Holzmann (Holzmann will no longer be governor as of the September Governing Council meeting, but we assume his successor, Martin Kocher, will not be quite as hawkish)

 

Unlikely to want to cut in September:

ECB Executive Board member Isabel Schnabel:

  • 12 June 2025: With core inflation seen sticking close to 2% over the horizon, policymakers could be ‘comfortable’ with their current stance. The situation was a ‘very clear case of looking through temporary deviations of headline inflation from target.’

 

As things stand, the Council appears finely balanced, with an equal number of members seemingly for and against a September move and a substantial contingent yet to show their hand. With seven members undecided, incoming data and developments over the summer will be crucial to tip the balance one way or the other.