(Bloomberg) -- The European Central Bank’s borrowing costs are probably too elevated given the backdrop of weak growth, according to Governing Council member Madis Muller.
“Right now it could be thought that we are at the boundary where interest rates are still more likely to be high considering the economic situation,” the Estonian central-bank chief told Äripäev radio on Friday, speaking less than 24 hours after the ECB lowered interest rates for the fourth time this year.
ECB policymakers expect to cut rates by another quarter point in January and probably also in March as inflation stabilizes at the 2% target and economic growth remains sluggish, officials familiar with their thinking told Bloomberg. A larger, half-point reduction remains an option in case of emergency, they said. But they stressed that such a step risks conveying an unintended sense of urgency.
The current level of rates is holding back the economy a little bit, Muller said, matching comments from the ECB’s policy statement that they are still restricitive. Markets are expecting another 100 basis points of cuts, he said, without stating if that scenario was in line with his thinking.
“A gradual improvement of the economic situation could take place in the whole of Europe, but no one is directly expecting a very powerful growth spurt or economic boom,” he separately told Vikerraadio earlier on Friday.
(Updates with comments on rate starting in first paragraph)
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