(Bloomberg) — An European Central Bank interest-rate cut at the next meeting currently looks likely, said Governing Council member Yannis Stournaras, adding that it’s too early to say for certain that such a move will happen.
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“Everything points in the direction of a cut in April,” he told Econostream in an interview. “But this is not April. It is still March. We have one month to go, so I cannot tell you that we’re going to cut.”
The ECB has lowered borrowing costs six times since June, though markets aren’t fully pricing in another reduction for the April 17 monetary-policy meeting. Stournaras said that he still sees two more steps this year, bringing the deposit rate to a terminal rate of 2%.
Speaking in an interview conducted March 20, the Greek central bank chief said that “I cannot tell you when these two cuts will happen. In a situation of such elevated uncertainty, it wouldn’t be prudent to be so precise.”
“Monetary policy is now meaningfully less restrictive, but still restrictive,” he said. “So overall, the direction of monetary policy is clear to me. It is towards reducing rates further, and markets agree with that. However, we need our data-dependent, meeting-by-meeting approach now more than ever, so I cannot say whether it’s going to be April or June, even if it’s clear to me that we still have some way to go.”
Stournaras also said:
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On inflation: “I think at the end of 2025 we will be very close to 2%. The recent decline of energy prices is encouraging. If we have peace in Ukraine, then energy prices will fall even further. Food prices will too, because both Ukraine and Russia produce a lot of wheat. But let’s wait, because we might have tariffs and retaliation that could impede the disinflation process. So, we have to be careful.”
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On German fiscal spending: “To start with the fiscal expansion, the real decisions are still to come. For now, we have higher bond yields, which is restrictive. The rise is based on expectations of higher debt and deficits, but Germany’s debt and deficit are very low, so it was right to remove the debt brake. That decision may signal higher future growth, but it is quite restrictive in terms of financing conditions, so it is an argument to lower interest rates. There’s no question about that.”
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On trade tensions: “As for tariffs, you saw what the ECB President Christine Lagarde said this morning in EU Parliament: short-term inflation may rise if there is retaliation, which seems inescapable, but lower economic activity would dampen inflationary pressures in the medium term. So, we have a stagflationary impact at first, but a deflationary one later on, and this should not distort our policy direction toward lower interest rates.”
