Transcript: Interview with ECB Governing Council member Radev on 17 January 2026
19 January 2026
By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 17 January 2026 with Dimitar Radev, Governor of the Bulgarian National Bank and member of the Governing Council of the European Central Bank:
Q: A few weeks ago, you said that the current level of interest rates was appropriate and that there was no reason to expect significant adjustments. What developments would lead you to support a change in the monetary policy stance, either upward or downward?
A: I continue to view the current level of interest rates as appropriate, insofar as it is consistent with a policy stance that can deliver a timely and sustained return of inflation to 2% over the medium term, based on the information currently available. A change in stance would require a clear and material shift in the inflation outlook.
On the upside, that would involve evidence of entrenched inflation persistence, particularly in services inflation and wage dynamics, together with indications that domestic price pressures are not easing as projected. On the downside, it would require sustained and broad-based confirmation that underlying inflation is durably converging below the 2% target across components, reflecting easing domestic cost pressures and weaker-than-expected demand.
Q: How do you currently assess the balance of risks to the inflation outlook? Which of those risks do you see as more likely to materialize?
A: Compared with earlier phases of the disinflation process, risks now appear more balanced, although uncertainty remains elevated. Upside risks are primarily domestic in nature, especially the persistence of services inflation, wage developments, and the interaction between wages and profit margins. Downside risks are mainly related to weaker-than-expected economic activity and tighter financing conditions. At this stage, developments in services inflation remain central to the overall assessment.
Q: Are you comfortable with market expectations that the next policy move could be a rate hike?
A: I would not comment on or seek to validate specific market expectations. Our decisions are guided by the data and by our analytical framework. Monetary policy rates will be set at a level consistent with ensuring that inflation returns to target in a timely manner and stays there, and will be adjusted if the inflation outlook were to change materially.
Q: Some of your colleagues have suggested that rate hikes are unlikely to be considered this year. What is your view on hikes in 2026: maybe or no way?
A: It would not be appropriate to pre-commit to a particular policy path for 2026. If the inflation outlook were to deteriorate materially, especially through more pronounced persistence in services inflation and wage dynamics, all options would need to remain on the table. Conversely, if disinflation continues to broaden and becomes firmly embedded in underlying measures, that would point in the opposite direction.
The policy path will be determined by the evolution of the inflation outlook and the strength of monetary transmission.
Q: As markets increasingly interpret the ECB’s repeated reference to policy being in a “good place” as signaling a reluctance to move, does that language risk constraining optionality rather than preserving it?
A: The intention of this language is to communicate that, based on current information, the policy stance is assessed as consistent with the return of inflation to target. It should not be interpreted as a commitment to inaction. Optionality is preserved through our reaction function: if incoming data were to lead to a material reassessment of the economic or inflation outlook, the policy stance would be adjusted accordingly.
Clear communication is essential, and decisions continue to be taken meeting by meeting, based on the evolving assessment of inflation dynamics.
Q: In our interview last July, you said that price pressures stemming from wages and services were “evident.” How has your assessment evolved since then?
A: The assessment has become more nuanced. There has been further progress in headline inflation converging to target and some easing in certain underlying price measures. At the same time, services inflation has remained relatively persistent, and wage growth continues to be a key determinant of the medium-term outlook.
The central question is whether these pressures ease broadly in line with projections or prove more persistent than currently assumed and take longer to unwind.
Q: What impact do you expect German fiscal stimulus to have on euro area growth and inflation?
A: If it is well-targeted at the domestic economy and sustained, it should support euro area growth, including through meaningful spillover effects to other countries. The implications for inflation depend largely on the design and implementation of the measures. Demand-heavy measures in sectors facing capacity constraints could add to inflationary pressures, while investment that raises potential output would be less inflationary over time. In any case, much of the impact is likely to materialize with a lag.
Q: Some of your colleagues have suggested that China is already increasing the flow of low-priced goods into Europe. Do you see evidence that this is occurring?
A: There are channels through which this could occur, but the assessment needs to be firmly grounded in the data, including developments in imports, goods prices, and indicators of price competition. Were such effects to materialize, they may be disinflationary for goods prices in the short term. At the same time, these developments raise broader structural questions that lie outside the remit of monetary policy.
Q: Some market participants argue that the ECB may be underestimating the disinflationary impact of Chinese imports. How do you assess that risk?
A: This is a risk that merits close monitoring. Import-driven disinflation can be meaningful for certain goods categories, but it does not automatically translate into broad-based disinflation. For the medium-term outlook, domestic inflation dynamics—particularly services inflation—and wages remain decisive.
If import price effects prove stronger or more persistent than assumed, they will be incorporated into the overall assessment, but they cannot substitute for evidence on underlying domestic price pressures.
Q: How do you currently view the balance of risks to the growth outlook?
A: Risks to growth remain tilted to the downside. External demand is weak, and the effects of past monetary policy decisions are still in part feeding through the economy, weighing on financing conditions and demand. At the same time, lower inflation is supporting real incomes, labor markets remain relatively resilient, and fiscal policy is providing some support in parts of the euro area.
The key question is whether the recovery becomes more broad-based while remaining consistent with the return of inflation to target.
Q: To what extent do you expect the anticipated recovery in consumption to materialize?
A: A recovery in consumption is plausible, but it is not automatic. Declining inflation supports real disposable income, but the pace of consumption growth will depend on household confidence, labor market conditions, and the extent to which past real income losses are recouped. Financing conditions and precautionary saving behavior will also play an important role.
Q: How do you assess the potential inflationary implications of a less independent Federal Reserve?
A: Central bank independence is essential for price stability. A perceived weakening of independence could raise inflation risk premia and increase global financial volatility. Spillovers to the euro area could occur through financial conditions, exchange rates, and global demand.
From our side, the focus remains firmly on our mandate and on maintaining price stability in the euro area.
Q: To what extent could imported inflation be offset by a potentially stronger euro if confidence in the Fed’s independence were to weaken?
A: Exchange rate movements can provide some buffering effect, but they should not be overstated. A stronger euro would, all else equal, dampen imported inflation, but the net impact would depend on the broader macro-financial environment, including changes in risk premia, global demand, and financial conditions. Ultimately, near-term inflation outcomes will be determined by the strength of domestic demand, financing conditions, and underlying domestic cost pressures.