(Bloomberg) -- The European Central Bank’s reductions in borrowing costs should be “gradual,” according to Governing Council member Yannis Stournaras.
“Given the heightened uncertainty, our moves should be gradual and our pace steady, continuing to be based on the available data,” the Greek central bank chief told To Vima newspaper in an interview. “Of course, larger cuts shouldn’t be ruled out if incoming data suggest below-target inflation over the medium term.”
The ECB has already cut interest rates in four quarter-point steps and is expected to continue doing so next year. Like Stournaras, most policymakers have voiced a preference for gradual moves — a term generally interpreted by markets as meaning 25 basis-point steps.
“Looking ahead, the medium-term inflation trend suggests that there is still significant room for further monetary policy easing,” said Stournaras, who is among the more dovish members of the Governing Council. “What worries me, however, is growth.”
The 20-member euro-area economy probably grew just 0.7% this year and the ECB predicts that output will only increase by 1.1% in 2025.
“The euro-area economy seems to be struggling to regain momentum,” Stournaras said. “Geopolitical risks remain elevated, while international trade pressures, which are set to intensify due to recent developments in the US and elsewhere, could further undermine global economic growth, with negative consequences for the already very modest growth rate of the euro-zone economy. Such a development, in turn, could push euro-zone inflation below target.”
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