ECB Official Sees Eurozone Inflation Gradually Reaching 2% Target

Christodoulos Patsalides, a member of the European Central Bank’s Governing Council, has stated that inflation in the eurozone is expected to gradually align with the ECB’s 2% target over time, despite ongoing geopolitical and economic uncertainties [1]. Speaking in an interview with Politis, Patsalides highlighted the eurozone’s resilience in the face of global trade tensions and geopolitical risks. He noted that the recently agreed EU-US trade deal could help reduce some of the prevailing uncertainties [1].

Patsalides emphasized that while inflationary pressures persist in the short term, driven by supply-side imbalances and elevated energy costs, these are expected to moderate as global markets stabilize and domestic demand adjusts [1]. The ECB’s recent decision to hold interest rates steady—after eight consecutive rate cuts—was framed by Patsalides not as a pause, but as a continuation of a data-driven policy approach. He reiterated that the central bank would continue to make decisions on a meeting-by-meeting basis, based on the latest economic data [1].

Other ECB members echoed similar sentiments, with Peter Kazimir cautioning against lowering rates in the near term unless compelling data signals a significant economic slowdown. Kazimir also warned that inflationary pressures could return, especially if supply chain issues resurface [1]. Meanwhile, Gabriel Makhlouf, the Irish central bank chief, advocated for a “wait-and-see” approach to further rate cuts, arguing that current levels of inflation and economic growth justify a more patient stance [1].

The eurozone’s second-quarter GDP growth came in at 0.1%, with the EU reporting 0.2% growth compared to the previous quarter. While modest, these figures reflect the region’s ability to navigate challenging conditions [1].

Analysts have noted that the eurozone may be entering a disinflationary phase, with recent declines in core inflation seen as a positive sign. However, Patsalides stressed the need for continued vigilance, particularly regarding potential shocks in energy markets that could disrupt the disinflationary trend [1].

With the ECB maintaining a restrictive monetary policy stance, the path toward the 2% inflation target appears increasingly viable, provided that external risks remain manageable. Patsalides and his colleagues have made it clear that policy decisions will remain flexible and responsive to evolving economic conditions [1].

Source:

[1] Patsalides expects inflation to align with ECB's 2% target over time (https://www.msn.com/en-us/money/markets/patsalides-expects-inflation-to-align-with-ecb-s-2-target-over-time/ar-AA1JPb46?ocid=finance-verthp-feeds)