ECB's Bold Call: Interest Rates May Go Even Lower

The ECB, led by policymaker Mario Centeno, might cut interest rates below neutral to stimulate growth, as inflation risks falling below 2%. With U.S. tariffs threatening, interest rates could drop further this year, and the ECB might consider more cuts to ensure economic stability in Europe.


Devdiscourse News Desk | Updated: 05-02-2025 21:42 IST | Created: 05-02-2025 21:42 IST
ECB's Bold Call: Interest Rates May Go Even Lower
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The European Central Bank might slash interest rates below neutral to spark economic growth, ECB's Mario Centeno revealed to Reuters. Inflation threatens to dip below the bank's 2% target, prompting urgent action.

Threats from U.S. tariffs on European goods add to the growth challenge. Centeno, Bank of Portugal governor, stressed the urgency of slashing the ECB's key rate from the current 2.75% closer to 2% this year. However, achieving this might require further cuts, potentially dropping rates below neutral.

Centeno criticized Europe's investment drought and cautious consumer behavior, noting these factors hinder growth. He emphasized the need for policymakers to balance costs, boost productivity, and allow wage recovery. While U.S. tariffs are problematic, redirected Chinese goods might offer slight relief.

(With inputs from agencies.)

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