ecb

European Central Bank (ECB) Governing Council member Yannis Stournaras has signaled a cautious approach to monetary policy, stating that further interest rate cuts are not warranted unless significant shifts in inflation or economic growth occur. Speaking on September 19, 2025, the Bank of Greece Governor emphasized that the Eurozone’s inflation is on track to approach the ECB’s 2% target by 2028, reflecting a “good balance” in the economic outlook. His remarks, reported by PANews, underscore the ECB’s commitment to stability amid global uncertainties, including U.S. policy shifts and geopolitical tensions, while maintaining a data-driven stance on future rate decisions.
A Measured Approach to Rate Cuts
Stournaras, a prominent voice in the ECB’s 26-member Governing Council, indicated that the central bank’s current policy stance, with key interest rates at 3.25% for the deposit facility, 3.40% for main refinancing operations, and 3.65% for the marginal lending facility, strikes an effective equilibrium. “Only a major shift in inflation or growth would justify more easing,” he stated, dismissing the need for immediate rate reductions despite recent downside risks. He described a potential additional quarter-point cut as “symbolic at best,” suggesting limited impact on market dynamics.
This cautious outlook follows the ECB’s decision to maintain borrowing costs at its recent meetings, reflecting confidence that price pressures are manageable. Stournaras projected an inflation trajectory of 1.7% in 2026, rising to 1.9% by 2027, and approaching 2% by 2028, aligning with the ECB’s medium-term target. This gradual convergence, he argued, supports the central bank’s strategy of holding rates steady unless significant economic disruptions emerge.
Navigating Global Uncertainties
Stournaras highlighted external factors, such as U.S. policy uncertainties under President Donald Trump’s second term, as potential risks to the Eurozone’s economic outlook. He noted that Trump’s proposed tariffs could lower growth and inflation if Europe avoids retaliation, but countermeasures might trigger a jump in prices, complicating ECB policy. “The best thing for us is to wait and reconsider our position once the new U.S. administration’s policies are clear,” he said, advocating for a wait-and-see approach to avoid premature adjustments.
Despite these uncertainties, Stournaras remains optimistic about the Eurozone’s economic resilience. Recent data showing inflation at 1.8% in August 2025, below the 2% target for the first time since 2021, supports his view that the ECB is nearing its goal of price stability. However, he cautioned that statistical base effects, such as fading energy price declines, could temporarily push inflation higher in late 2025, necessitating vigilance.
Balancing Growth and Inflation
Stournaras’ comments reflect the ECB’s delicate balancing act between fostering economic growth and controlling inflation. The Eurozone economy has shown signs of weakness, with confidence indicators described as “just between life and death” and growth lower than anticipated. Stournaras previously supported two quarter-point rate cuts in 2024, citing softer-than-expected economic data, but now sees the current policy as sufficient unless conditions deteriorate significantly.
The ECB’s data-dependent approach, reinforced by Stournaras, aligns with its meeting-by-meeting strategy, with upcoming economic projections in December 2025 expected to guide future decisions. He emphasized that wage growth and other inflationary pressures remain key variables, but current trends suggest inflation will stay below 2% for several years, reducing the urgency for further easing.
Implications for Markets and Investors
Stournaras’ remarks temper expectations for aggressive rate cuts, impacting investor sentiment in a Eurozone grappling with a stronger euro and muted growth forecasts. The ECB’s prediction of 1.7% inflation in 2026 and 1.9% in 2027, coupled with Stournaras’ 2028 outlook, suggests a stable monetary policy environment, supporting the euro’s value. However, his acknowledgment of potential U.S.-driven disruptions introduces uncertainty, with markets pricing a 25% chance of a half-point cut in December 2025, down from earlier expectations.
The ECB’s steady policy stance contrasts with the Federal Reserve’s recent quarter-point rate cut on September 17, 2025, highlighting divergent monetary strategies. While the Fed responds to labor market weakness, the ECB’s focus on medium-term inflation stability reflects a more conservative approach, with Stournaras advocating gradualism to avoid market volatility.
Looking Ahead
As the ECB navigates a complex global environment, Stournaras’ outlook underscores its commitment to data-driven policy and economic stability. With inflation projected to approach 2% by 2028, the central bank appears well-positioned to maintain current rates unless significant disruptions emerge. Upcoming ECB meetings in October and December 2025 will be critical, with Stournaras’ cautious stance likely influencing discussions on balancing growth and inflation.
For investors and policymakers, Stournaras’ remarks signal a period of relative calm in Eurozone monetary policy, with flexibility to adapt to unforeseen challenges. As the ECB monitors global developments and domestic data, its steady hand will play a pivotal role in shaping the Eurozone’s economic trajectory through 2028 and beyond.

#ECB #interestrates #Inflation #MonetaryPolicy