The ECB needs to ease monetary policy to boost eurozone economic growth
Mario Centeno, a member of the European Central Bank (ECB) Governing Council, calls for further easing policies to stimulate the eurozone economy. He confirmed that the current interest rate is not sufficient to promote an environment with stable inflation around 2%, which policymakers hope for.
Focus on monetary policy and the ECB's objectives
Centeno emphasized, "The interest rate needs to align with an economy that generates sustainable 2% inflation." However, in reality, the eurozone economy has not yet reached this level. The market is too weak to sustain recovery momentum, requiring even stronger support policies to avoid financial disruption and maintain stability.
The current GDP index does not reflect potential
According to Centeno, GDP is currently below potential, indicating that the economy is not in a balanced state. If the neutral interest rate is 2% but output is still below it, rates need to be adjusted lower to bridge this gap. Despite there being 8 rate cuts within 12 months, he still maintains that policy needs to continue easing.
End of term timing and its impact on ECB decision-making
In addition to predictions about policy, Centeno's remarks come ahead of the scheduled policy meeting on July 24. However, his term ends in early July, and it is unclear whether he will continue. This could affect future policy decisions of the ECB, especially as global economic factors are changing rapidly.
Securities and energy – an ongoing issue
In the context of declining inflation after the price surge in 2022, the easing policy has helped control the situation, especially after the energy price shocks due to the Russia-Ukraine war. However, policymakers are still considering the next measures as inflation approaches the 2% target, while the economy remains fragile.
ECB President and trade cooperation strategy in the EU
During a visit to Kyiv, ECB Executive Board member Christine Lagarde emphasized that increasing intra-EU trade links helps mitigate risks from external shocks. She stressed the need to promote long-term economic relationships in the region, especially in the context of war causing significant global instability.
Monetary policy and immediate challenges
From the perspective of the French Central Bank, Villeroy de Galhau warns that the ECB should maintain flexibility in policy to respond to potential risks such as energy price volatility and the euro's appreciation against the dollar, which could reduce inflationary pressures but negatively affect exports.
Adjusting policy in line with global developments
Villeroy emphasized that decisions in the next 6 months should rely on the latest data. The bank should maintain flexibility, avoiding hesitation that could destabilize. At the same time, policymakers need to be highly vigilant, continuously monitoring factors such as energy prices and exchange rates to adjust policy accordingly. The current main risk is that international conflicts could push energy prices back up, putting pressure on inflation and affecting global growth.
Source: https://tintucbitcoin.com/ecb-can-day-manh-bom-tien-euro/
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