Greek ECB Governing Council member Yannis Stournaras told Bloomberg today that a 25 bps rate cut at the upcoming December meeting would represent “an optimal reduction”.

He acknowledged that interest rates remain firmly in restrictive territory, emphasizing that even with continued cuts to reach the neutral rate, “it’s still a long way to go,” indicating multiple reductions are likely ahead.

Stournaras also highlighted the optimistic revision in inflation expectations. “The baseline is that now, inflation falls more rapidly than we thought in our September forecasts,” he noted, adding that ECB could meet its 2% inflation target on a sustainable basis by early to mid-2025 rather than by the end of the year.

Irish ECB Governing Council member Gabriel Makhlouf signaled caution today, emphasizing that an interest rate cut at the December 12 meeting is not guaranteed.

“It would be going a bit far to say an ECB interest rate cut next month is ‘in the bag,’” he stated, adding that the evidence s would need to be “pretty overwhelming” for a more aggressive 50bps reduction.

Makhlouf also addressed the uncertainty surrounding the impact of US President-elect Donald Trump’s administration on inflation dynamics. He stressed that it would be “premature” to base monetary policy decisions on assumptions about Trump’s fiscal and trade policies, stating, “I do think it would be premature to come to conclusions as to exactly what it is that the new US administration is going to do.”

In reviewing the October meeting accounts, ECB policymakers broadly agreed that the disinflationary trend in the Eurozone is progressing “well on track”.

While “upside risks” to inflation persist, they are now viewed as less significant, whereas “downside risks” have increased, influenced by slower economic activity.

This shift in balance suggests that inflation may reach the 2% target “somewhat earlier” than anticipated, with projections potentially indicating a lower inflation rate in 2025 than previously forecast.

Divergent views emerged regarding the precise impact of weaker economic growth on inflation, with members agreeing to revisit a more detailed assessment in December when updated projections become available.

A critical element behind the decision to cut rates was “risk management.” Members widely agreed that if the current economic slowdown proves “temporary”, cutting rates now could be seen as “having brought forward” a December cut. However, if data reveals “persistent weakness,” the move would constitute a “timely adjustment”.

In light of this economic environment, ECB Governing Council reached a consensus to lower rates by 25 basis points.

Full ECB accounts here.

ECB Vice President Luis de Guindos shared a mixed outlook today, highlighting progress in inflation but tempered growth prospects.

“There’s good news with inflation and not so good news on economic growth,” he remarked, noting ECB’s expectation that services inflation will ease over the coming months.

De Guindos added that inflation is expected to “converge in a clear and stable manner towards price stability, 2%,” a target that reinforces the bank’s commitment to maintaining price control.

On the economic front, de Guindos admitted “recovery we were anticipating is not happening with the intensity we expected”. Although household incomes have seen some improvement, it has yet to translate into stronger consumer spending.