Transcript of Interview with ECB Governing Council member Scicluna on 15 September 2025

16 September 2025

By David Barwick and Marta Vilar – VALLETTA (Econostream) – Following is the full transcript of the interview conducted by Econostream on 15 September 2025 with Edward Scicluna, Governor of the Central Bank of Malta and member of the Governing Council of the European Central Bank:

Q: Governor, last Friday, the day after the press conference, a number of your colleagues came out and tried to keep alive the idea of another rate cut. Why on Friday and not in the meeting?

A: No one said anything in the meeting room about leaving a rate cut for October or December. We very clearly said we weren’t ruling anything out, consistent with our data-dependent, meeting-by-meeting approach. It’s more appropriate to say that neither October nor December is ruled out. At the moment, we are in a delicate balance as a result of countervailing forces. We didn’t think it would be wise to tempt fate, so to speak, by making a preemptive change that could upset this balance. Of course, people spoke of downside risks, but not in the sense of determining the policy decision. It’s complicated: for example, everybody's happy that the uncertainty has diminished because the EU and the US have reached a trade agreement, but whether it’s fundamentally positive or negative depends on your baseline. And then you read the paper and see that NATO members, many of them euro area countries, must stop buying Russian energy. This could be very important for monetary policy, but it’s too soon to say. We have all these external factors, along with the underlying momentum of our economy – which remains resilient – and overall, it made sense to wait and see.

Q: So, you were also for continuing the pause last week? Did you think a cut was worth considering?

A: The decision was unanimous. No one expressed disagreement. We all agreed to leave rates unchanged and to maintain this state of balance we’re in. There are downside risks, but no one is sure they will materialize, so we have to wait and see.

Q: One governor said recently that another cut was likely and just a matter of timing. Do you agree?

A: As I read it, we're not talking of a cycle which has to end by December. I didn't get that feeling. The possibility of a cut depends upon this balance between the resilience of the economy and external factors like tariffs and the exchange rate, along with geopolitics. If we see that the balance has clearly tilted, then we would act. But not because we’ve committed ourselves; there is no cut already in a box and just waiting to be unpacked. If December comes and we remain in balance, then we won’t move. I say December not to rule out October, but what's special about December is the forecast, and when you have a difficult decision, it’s helpful to have the comfort of updated projections. If something significant and obvious happens before October, then we don't need a forecast to make a decision. If not, we wait until December and we'll see, based on the forecasts. But we're not committed one way or the other.

Q: And what factors would most likely lead you to want to cut in December?

A: Again, I think tariffs and exchange rates dominate. To cite one example, our latest forecasts incorporate some easing by the Fed already, but depending on how much there is, we could get a more over-valued euro hurting the competitiveness of open, export-oriented economies in Europe.

Q: It sounds like you’re personally also in a wait-and-see mode. Is it correct to say that you're not actually hoping that there will be a cut?

A: Of course, we know that without any change, we’re facing an inflation rate slightly under target. And inflation of exactly 2% is our Holy Grail. We want to be as close as possible, and we notice any deviation. But small deviations are no reason to panic.

Q: How satisfied are you with the new forecasts for growth and inflation?

A: Generally, we all agreed with or at least accepted the new forecasts. There were various comments made. They’re not perfect. But there wasn't any disagreement strong enough to say they should be different. So, the forecasts were, on the whole, accepted by the Council.

Q: You’ve identified mainly downside risks to growth and inflation. Do you feel that the balance of risks in both cases is tilted to the downside?

A: If we’re talking about tariffs or exchange rates, then we are clearly talking about downside risks. On the other hand, the resilience of the economy and the fiscal stance are arguably an upside risk, especially on account of defense commitments. On the other hand, the fiscal stance is very expansive and the economy is resilient. So, I'm not saying that all risks are to the downside. The most prominent ones are, but overall, we do see a balance at the moment. There was full agreement on that, and hopefully it will last. And this is why I don't think we should meddle at this stage, because of possible downside risks that might not materialize.

Q: It sounds like you agree with Governor Nagel, who said over the weekend that if the ECB cut rates again, it might actually jeopardize price stability.

A: There you are. It would be what I called tempting fate.

Q: Would you characterize the current monetary policy stance as accommodative?

A: I would call it broadly consistent with medium-term price stability, so broadly neutral. Current monetary policy is not going to upset this state of balance. If it’s upset, then by other forces.

Q: Speaking of which, how worried are you about France, given Friday’s downgrade by Fitch?

A: France is a big country, so we are monitoring developments, but it’s not directly affecting ECB thinking at this point. The downgrade matters, of course. It has to be taken as a warning. But it’s good that there is someone independent who’s calling a spade a spade.

Q: You are open to the possibility of responding with a cut in December if the undershooting of inflation next year is no longer so transitory, right?

A: Yes, that might be a reason for a cut. But small deviations are not a reason to overreact. When you react, you create a force that can lastingly upset a balance that would otherwise have restored itself without any action from you. So, it’s important not to react too quickly and just to be patient in certain instances. This is how we felt last week. Whether we will continue feeling that way in October and December, we'll see.

Q: We've got this pressure on the Federal Reserve by Donald Trump. Next year a new Fed chair will probably do what Donald Trump wants, which is cut interest rates. So, it seems like the euro will continue to strengthen. How long can the ECB ignore that?

A: We are aware of that of course. And the scenario you are painting is not improbable, in which case Europe's competitiveness will be negatively affected. So, we want to rule that out. But we did not ignore that at all last week. It can become quite significant. It will feature, definitely, in our decisions.