ECB’s Cipollone: “Ready to React if Inflation is Expected to Deviate Significantly from our 2% Target”

25 September 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank Executive Board member Piero Cipollone on Thursday again endorsed the ECB’s current monetary policy stance and declined to encourage expectations of another rate cut, suggesting that this would require a major deviation from target.

In an interview with Italian newspaper Milano Finanza, Cipollone, asked what could lead the Governing Council to ease further, said, “We are in a ‘good position’ in the sense that inflation is currently at our 2% target and our macroeconomic projections do not foresee a significant deviation from this level in the medium term. Inflation expectations are also well anchored.”

The ECB took a data-driven, meeting-by-meeting approach to setting monetary policy, he reminded, and was “ready to react if inflation is expected to deviate significantly from our 2% target in the medium term.”

Inflation risks were “broadly balanced overall” in an uncertain environment, he said.

“On the one hand, the European economy remains relatively robust and growth has been stronger than expected,” he said. “But we must factor in the possibility that geopolitical and trade tensions could fragment value chains, with possible upward pressure on prices.”

Meanwhile, the euro has grown stronger, while the lack of European retaliation in response to US tariffs “has significantly reduced the upside risk to inflation,” he said. As well, trade flows could change due to the tariffs, he said.

“On the whole, these factors collectively represent a significant downside risk to inflation, which we must monitor closely and weigh against upside risks,” he said.

If the US Federal Reserve were to ease its policy, this would be taken into account by ECB projections, he said. The euro also entered into forecasts, he said.

“When the euro appreciates, all other things being equal, it weighs on net exports, which, according to our projections, will slow growth in 2025 and 2026,” he said. How European competitiveness was affected depended on other factors as well, he noted.

“We should not overlook the fact that the euro’s appreciation also lowers the import prices of commodities billed in dollars, such as oil, and generally makes foreign goods and services cheaper,” he said. “Our macroeconomic projections support our monetary policy decisions and allow us to account for these effects.”