European Central Bank (ECB) policymaker Yannis Stournaras is backing two interest rate cuts this year and expects further easing in 2025 as inflation continues to trend lower, he told the Financial Times in an interview published on Wednesday.
"Even if we have one cut of 25 basis points now and another one in December, we will be back to just 3 per cent — still in highly restrictive territory," Stournaras told the newspaper, referring to the ECB's main policy rate.
Stournaras, the governor of the Greek central bank, said inflation could be on the path to meet ECB's 2% target in the first half of 2025, boosting the case for policymakers to cut "highly restrictive" interest rates faster than previously expected, the FT reported.
He added that inflation was falling faster compared with our (the ECB’s) September forecast.
The ECB has cut interest rates twice this year and further easing in both October and December is nearly fully priced in, indicating that investors predict a steady decline in rates from record highs taking cues from weak economic growth and faster-than-expected easing in inflationary pressures.
"If inflation continues the downward path towards the 2 per cent target, why not cut in every meeting?" Stournaras told the FT.
Last week, ECB President Christine Lagarde gave the strongest hint yet that an October rate cut was coming.
