Stournararas: ECB should lower interest rate at each meeting until it reaches 2%

The European Central Bank should reduce lending costs (p. ) at each meeting until it reaches a level that does not limit or stimulate economic activity, according to the board member, . “As inflation is now evolving and as the real economy is now evolving, I think we should have a reduction (interest rate) in each meeting from now on until we reach what we call a neutral interest rate,” said Mr. Stournaras on Bloomberg television today. “This is a deceptive concept, but according to estimates, it’s about 2%”. At the same time, Mr. Stournaras said that a fourth reduction in the deposit rate by a quarter of the unit for this year in December – which will bring it to 3% – would be the “right answer” at the moment, while adding that he “can’t say” if a move of 50 basis points is excluded. “We still have nothing on the table on the other hand, we don’t know how markets react, what the Fed will do,” he said. ECB policy makers are preparing for their last policy meeting this year, with investors and analysts agreeing that another step by a quarter of the unit is the most likely result after a sharp slowdown in inflation that was sharper than expected. Most also predict a series of cuts in 2025, although it remains to be seen how this thought is affected by Donald Trump’s return to the White House – especially in light of his plans to impose duties on key trading partners. Stournaras said earlier this week that these could weaken European economic activity and even lead to recession and deflation. Vice-President Luis de Guidos said yesterday (20.11.24) on Bloomberg television that it is “five-clear” that interest rates would be further reduced “in the coming months and quarters”, but officials should be careful due to current increased uncertainty. Noting the remaining risks, the third quarter’s negotiating salaries took the biggest leap since the introduction of the euro in 1999, although analysts see that these trends are being mitigated next year. “We expect it to decrease in the coming months,” Stournaras said. “We thought it was a flash, but not a permanent increase”.