In Frankfurt on January 22, European Central Bank policymakers expressed strong support for future interest rate cuts. Following multiple rate cuts due to economic challenges, the ECB is poised to continue this trend in 2025, with the expectation further reinforced by President Christine Lagarde and council members Francois Villeroy de Galhau, Klaas Knot, Yannis Stournaras, and José Luis Escrivá indicating their favor for additional policy easing.
Lagarde mentioned to CNBC that the path for interest rates is clear, emphasizing a gradual approach contingent on data. While cautioning against haste, she noted the importance of monitoring the weak euro's impact and other relevant factors.
Villeroy anticipated a swift reduction in the ECB's deposit rate, aiming to reach 2% by summer, aligning it with the bank's 2% inflation target. Knot supported upcoming rate cuts based on positive economic indicators but highlighted potential risks, particularly regarding the long-term impact of trade policies.
Stournaras advocated for incremental rate adjustments and projected a move towards a 2% deposit rate by year-end, underscoring the potential consequences of significant U.S. tariffs on economic growth and ECB's response.
Market expectations align with further ECB cuts in 2025, leading to a possible 2% deposit rate by year-end. Lagarde indicated the ECB's pursuit of a neutral interest rate between 1.75% and 2.25%, with Knot expressing reservations about entering a stimulating mode prematurely, emphasizing the need for data-driven decisions.