ECB’s Wunsch: Further Rate Cuts Are Becoming Less Likely
The chances of more interest rate cuts from the European Central Bank (ECB) are fading, according to Belgian central bank Governor Pierre Wunsch. He noted that the Eurozone economy remains resilient and inflation is staying close to the ECB’s 2% target.
In recent months, the ECB has already lowered rates by a total of two percentage points up to June. Since then, policymakers have paused to evaluate whether further monetary easing is necessary. Their main concern is that consumer prices could start rising too slowly again.
“Given that the economy is proving resilient, the chance that further rate cuts will be needed is receding,” Wunsch told Reuters during the IMF’s annual meeting. He added, “I’m quite comfortable where we are today, though I remain open.”
However, Wunsch acknowledged that downside risks still exist. Factors such as tariffs, a weaker U.S. dollar, and the possibility of China exporting surplus goods could influence future rate decisions.
Inflation Outlook and Policy Stance
Current forecasts show that inflation may fall to 1.7% next year, before gradually returning to the ECB’s target level. This outlook has sparked concern among some southern European policymakers, who fear that price growth might stay below the desired threshold.
“I don’t see major risks for inflation either on the upside or downside,” Wunsch said. “But I also don’t get nervous about numbers like 1.8% or 2.2%.”
He emphasized that not all deviations from the target call for the same policy response. The ECB’s decisions, he said, should depend on economic fundamentals such as growth and employment.
“If we’re growing at potential, the labour market is healthy, but inflation is still below target, I’d support a mildly supportive stance — but not aggressive accommodation,” Wunsch added.
Finally, Wunsch stated that he is comfortable with current market expectations for interest rates. Markets currently see almost no chance of a rate cut this year, and only a 50% probability of a move by next June.
