ECB’s Pereira: Must Keep Policy Space in Case New Shock Calls for Further Cuts

21 November 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member Álvaro Santos Pereira said on Friday that it was important for the ECB to preserve sufficient policy space in case new shocks make additional rate cuts necessary.

Speaking at the CNN Portugal Internacional Summit in Alcobaça, Portugal, Pereira, who heads the Banco de Portugal, noted that indicators of political, economic and trade-related uncertainty had surged to levels not seen in decades.

“They have come down a bit, but they still remain quite elevated,” he said.

Although global growth had slowed compared to the pre-pandemic period, the economy remained “resilient,” he said.

Turning to Portugal, Pereira said that annual growth of 2% was “good, but not enough,” as sustaining this rate would require 35 years to double GDP per capita. “So, we cannot be satisfied,” he said. “Growing 3% or 4% would be better.”

Financial market valuations have risen sharply, particularly in the United States, where levels are the highest in decades, raising the question of whether a correction might occur, he said.

The ECB was in a “good position” with interest rates at 2%, Pereira said, and stressed that it was “also important to maintain room for maneuver in interest rates in case new shocks occur.”

Preserving this margin, he added, would allow central banks to respond decisively by cutting rates and “supporting the economy” if another shock were to materialise.