(Bloomberg) -- The European Central Bank is almost certain to cut interest rates by a quarter point in December, according to Governing Council member Yannis Stournaras.
Asked if such a move is a done deal, the Greek central bank chief said “more or less,” and that he thinks “25 basis points is an optimal reduction.”
Speaking at Bloomberg’s “Future of Greek Finance Symposium” in Athens on Monday, Stournaras also predicted that benchmark borrowing costs could fall “close to 2%” if inflation continues to slow as policymakers expect toward the end of 2025.
“We are in tightening territory still, and even if we continue cutting interest rates until we get to the so-called neutral rate, it’s still a long way to go,” he said. “So there’s going to be a number of cuts.”
The ECB has reduced rates three times since June and is expected to do so again next month at its final decision of the year. What happens after that is unclear, with the reelection of Donald Trump in the US increasing the risk of a protectionist turn, which could increase inflationary volatility around the world.
Stournaras highlighted that tariffs could have a detrimental effect on Europe, potentially sparking a recession and a period of deflation in the medium term.
Still, consumer-price growth has slowed much more quickly than predicted, said the Greek official, who is among the more dovish policymakers on the 26-member Governing Council.
“The baseline is that now, inflation falls more rapidly than we thought in our September forecasts,” he said. “It seems that we will achieve the 2%, on a sustainable basis at 2% inflation, in the first or second quarter of 2025 rather than than in in the last one.”
Other ECB policymakers have mostly been more circumspect, saying that while the direction of rate moves is clear, the pace and speed is anything but that. For Stournaras, the risks appear to lean only one way at present.
“Things are benign as far as inflation is concerned, growth is a bit weaker also,” he said. “That means that we should continue cutting interest rates.”
--With assistance from Sotiris Nikas and Paul Tugwell.
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