ECB's Interest Rate Cuts to Be Gradual - Council Member Stournaras

Investing.com -- European Central Bank (ECB) Governing Council member Yannis Stournaras stated that reductions in the bank's borrowing costs should be implemented gradually. Speaking to To Vima newspaper, the head of the Bank of Greece suggested that while larger reductions cannot be ignored, they would only be considered if data indicates inflation is expected to remain below target in the medium term.

The ECB has already lowered interest rates in quarter-point increments and this trend is expected to continue into next year. Many policymakers, including Stournaras, expressed a preference for gradual moves, which the markets generally interpret as 25 basis points.

Positioned among the more dovish members of the Governing Council, Stournaras argued that there is still significant room for further easing in monetary policy when considering the medium-term inflation trend. However, he expressed concerns about the growth rate of the Eurozone economy.

It was noted that the Eurozone economy is likely to grow by only 0.7% this year, and the ECB is forecasting a mere 1.1% increase in output by 2025. According to Stournaras, the Eurozone economy is struggling to gain momentum. He pointed out that high geopolitical risks, along with increasing pressures in international trade due to recent developments in the US and other countries, are potential factors that could further weaken global economic growth. This situation could push Eurozone inflation below the target.