European Central Bank Governing Council member Wunsch stated that the central bank may need to lower interest rates to below 2% -- Financial Times
The Governor of the National Bank of Belgium and a member of the European Central Bank, Pierre Wunsch, stated that due to the downward risks to inflation and economic growth posed by global trade tensions, the European Central Bank may need to lower interest rates to below 2%. He mentioned that recent shocks may prompt a mild supportive monetary policy, with deposit rates potentially falling below 2.25%. The market expects a roughly 90% chance of a rate cut on June 5, but only one more rate cut is anticipated within this year, with deposit rates possibly bottoming out at 1.75%
European Central Bank Governing Council Member Wunsch Says the Central Bank May Need to Lower Interest Rates Below 2% -- Financial Times
Reuters, May 18 - Pierre Wunsch, Governor of the National Bank of Belgium and a member of the European Central Bank's Governing Council, told the Financial Times in an interview on Saturday that due to the downward risks to inflation and economic growth posed by global trade tensions, the European Central Bank may need to lower interest rates to "slightly below" 2%.
Wunsch, who has previously been known for his hawkish stance, told the Financial Times that recent shocks and uncertainties may provide reasons for adopting a more accommodative monetary policy, including potentially lowering the deposit rate below the current level of 2.25%.
The report quoted Wunsch as saying that he sees no reason for a larger half-percentage point rate cut in the foreseeable future.
He also stated that developments in the Eurozone since U.S. President Trump announced tariffs on April 2 have created significant "downward inflation risks" and posed an additional threat to economic growth.
Wunsch told the Financial Times that the Eurozone may face "negative (economic) shocks in the short term," followed by potential "positive shocks in 2026 and 2027."
Currently, the market estimates a roughly 90% chance that the European Central Bank will cut rates on June 5, but only one more rate cut is expected for the remainder of the year, suggesting that the ECB's deposit rate may bottom out at 1.75%.
The report stated that Wunsch expressed he is "not surprised" by this forecast and is open to considering further easing policies
