ECB Officials: Economy Weakens with Divergent Views on Rate Cuts

Remarks of Officials

Central Bank

Summary:

On October 24th, ECB Governing Council Member Wunsch stated that it's too early to talk about a 50-basis-point interest rate cut in December. Meanwhile, Governing Council Members Kazaks and Muller argued for maintaining a gradual path of interest rate reductions, and Nagel suggested that the ECB should not rush into cutting rates.

On October 24th, ECB Governing Council Member Wunsch stated that it's too early to talk about a 50-basis-point interest rate cut in December, echoing concerns over signs of economic weakness in the Eurozone. Meanwhile, Governing Council Members Kazaks and Muller argued for maintaining a gradual path of interest rate reductions, and Nagel suggested that the ECB should not rush into cutting rates but maintain policy flexibility instead.

ECB's Wunsch

Despite signs of weakness in the eurozone economy, it is too early to discuss a 50 basis point cut in December. He cautioned against overstating the implications of inflation dipping to levels around 1.8% or 1.7%, given that the Eurozone has been grappling with above-target inflation for some time

Wunsch emphasized that while financial markets frequently speculate about the likelihood of rate adjustments, the ECB must await more inflation data and closely monitor the evolution of the economy before reaching any conclusions.

ECB's Muller

I continue to believe that we will see a gradual recovery and that the ECB should maintain its path of gradual rate cuts.

ECB's Kazaks

Governing Council Member Kazaks observed that domestically generated price pressures in the Eurozone exhibit stickiness but reassured that the risk of overheating inflation is less severe than previously feared. The subdued economy may expedite achieving the 2% inflation target earlier than anticipated, possibly by late 2025. Once this objective is met, policymakers should avoid lingering in restrictive territory. Also, the trajectory of interest rates is clearly trending downward.

We should not keep interest rates at high levels for too long, and it is appropriate for the ECB to adjust policy rates gradually.

ECB's Nagel

The ECB is confident it will reach the inflation target next year. An urgent rate cut should be avoided, and a flexible policy should be maintained.

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ECB Officials: Economy Weakens with Divergent Views on Rate Cuts

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