Member of the Executive Board of the European Central Bank (ECB) Isabel Sneabel said there should be a significant downward change of inflation to justify a new reduction in borrowing costs, rejecting the concern that the economy is making it difficult.
In her statements to the Economostream, which represent some of the strongest reactions to the extension of the annual relaxation campaign, Snabel said the interest rates are “in a good spot”, with deflation proceeding to generally proceeding as the economy is expected.
«The bar for yet another interest rate reduction is very high“She said in the interview, which took place on July 9th. “There would be a chance for another interest rate reduction only if we see evidence of substantial divergence of inflation from our goal in the medium term. And for the time being, I don’t see any evidence of that. ”
With inflation ranging around the target of 2%, The ECB plans to keep interest rates on hold when he meets later this month. Officials have not closed the door to further reductions, though most have said they want to see how the economy will evolve before taking other measures.
Some, including Finland’s Olli Rehn and Francois Vilua de Gallo of France are worried that price rise will fall below the targetespecially if the euro continues to be reinforced against the dollar. Others are also concerned about growth, with French Prime Minister Francois Bairou even criticizing the central bank yesterday Thursday (10.7.2025), saying the ECB should do more to support the economy.
“I do not see the danger of a constant undercover of inflation in the medium term,” Snabel said. “The core of inflation is projected to be targeted across the view of projection. Low inflation of energy prices is probably temporary and the fear that the appreciation of the exchange rate will exert a downward pressure on the underlying inflation is excessive in my opinion. ”
Most policy makers said that at 2%deposit rate, borrowing costs are now in a neutral zone that does not restrict or stimulate activity. But Sneabl has questioned this view, saying that “we are facilitating”, citing the growing demand for mortgages.
Austrian Geraki Robert Holcman also said in comments released this week that the ECB does not need to continue the policy of relaxation and that borrowing costs are “quite likely to be on expansive ground”.
However, Holcman and Snabel represent the two most hawk voices on the 26 -member board and others still see room for further relaxation.
“If the downward risks to growth reinforce deflationary trends, it would be advisable to continue monetary relaxation,” Italian Fabio Panetta said in a speech on Friday (11.7.2025). “The key issue now is whether the current level of interest rates is suitable for maintaining inflation close to the target, avoiding prolonged deviations in any direction.”
A great uncertainty is the future commercial relationship with the US. Donald Trump has promoted his offensive duty regime, announcing rates that will come into force in August. An announcement is expected soon for the European Union, which seeks to lock the current rate of 10%.
While such a scenario would be in line with the ECB’s basic provision published in June, an agreement with the US would also help the economy, Snabel said.
“Duties have a short -term aggravating effect on economic activity,” he said. “However, if the negotiations are successfully completed, this will reduce uncertainty, which will support consumption and investment.”