European Central Bank Executive Board Member Schnabel: The Eurozone can continue to cut interest rates but must proceed with caution
European Central Bank Executive Board member Schnabel stated that as inflation approaches 2%, there may be room for the European Central Bank to continue lowering interest rates, but caution is required. She mentioned that while the possibility of rate cuts exists, careful consideration must be given to the extent of the cuts. It is expected that by 2025, the European Central Bank will lower rates by 100 basis points, bringing the deposit rate down to 2%. At the same time, Trump's return to the White House could trigger trade risks, impacting the Eurozone economy and prices. Schnabel emphasized that the current uncertainty is suppressing private consumption and investment
According to Zhitong Finance, Isabel Schnabel, a member of the European Central Bank's Executive Board, stated that as inflation approaches 2%, there may be room for the European Central Bank to continue lowering borrowing costs, but it must proceed with caution.
In an interview, she said, "We currently believe there are no significant risks that could prevent us from achieving our 2% target. If that is the case, we may further lower interest rates."
However, she also emphasized, "After significant rate cuts in recent months, we are getting closer to a moment where we must consider more carefully whether we can still lower rates and to what extent we can lower them."
The European Central Bank has indicated that it will cut rates by 25 basis points again at its meeting in less than two weeks, following four rate cuts in 2024. With inflation expected to remain at 2% this year, officials are turning their attention to the struggling economy.
Economists and investors expect the European Central Bank to cut rates by 100 basis points by 2025, with the deposit rate falling from 3% to 2%. Nevertheless, uncertainty regarding the eurozone's economic growth and inflation outlook is rising, especially due to the trade risks posed by Trump's return to the White House on Monday.
Schnabel noted that the new U.S. government is "very likely" to trigger trade conflicts, which could have potential negative impacts on European economic activity and prices, especially if the EU takes retaliatory actions, "which would lead to higher import prices."
Schnabel pointed out that there is currently very little information about Trump's plans, leading to extremely high uncertainty, which is suppressing private consumption and investment. She stated that this is "poison" for the economy.
However, Schnabel remarked, "We are getting back on track and expect to return to the 2% inflation target this year. The extremely high inflation over the past few years has been very difficult for many. It took us quite a long time to respond."
Regarding the German election issue, Schnabel believes that the new government following the early elections on February 23 will face three major challenges: overcoming the country's structural crisis, managing the green transition, and addressing the shortage of skilled workers