European Central Bank Governing Council Member Müller: There is currently no need to cut interest rates to stimulate the economy; inflation is basically in line with the target
European Central Bank Governing Council member Müller stated that the current economic conditions are insufficient to support interest rate cuts to stimulate the economy, and officials can temporarily halt easing policies. Müller pointed out that there have been eight interest rate cuts since June 2024, and the inflation rate is basically in line with the target, so borrowing costs can remain stable at this month's meeting. He believes that the current interest rate level is low enough not to hinder economic recovery, while attention should be paid to the impact of future economic developments and changes in trade relations on the EU economy
According to the Zhitong Finance APP, Madis Muller, a member of the European Central Bank and Governor of the Bank of Estonia, stated that the current economic conditions are not sufficient to support interest rate policies aimed at stimulating economic growth. Therefore, officials can temporarily halt easing policies to observe the economy's performance in the face of various adverse factors. Muller noted that there have been eight rate cuts since June 2024, and inflation is "basically at target levels," allowing the European Central Bank to maintain stable borrowing costs when it meets later this month.
Muller said, "At this point, it seems to me that we do not yet need to enter the realm of expansionary policies. Economic growth is weak but is gradually recovering. Therefore, it is reasonable to maintain the current interest rate levels and closely monitor subsequent developments—because the current interest rate levels are already low enough not to hinder economic recovery."
Earlier data showed that the inflation rate in the Eurozone accelerated for the first time since June this year, aligning with the European Central Bank's target level of 2%. ECB staff believe that inflation will stabilize at this level in the medium term after falling below it in 2026.
The European Central Bank also hopes to gain further insights into the changing trade relationship between the EU and the US, as well as the impact of tariffs set by the Trump administration on the EU economy. Another factor to consider is whether Brussels officials will take retaliatory measures.
Muller stated during the European Central Bank's annual meeting in Sintra, Portugal, "Currently, it is difficult for us to determine the specifics for September. But at least in terms of trade, we should be able to understand the situation more clearly, and perhaps we can gain more insights into fiscal plans, allowing us to make better new assessments."
He mentioned that the risks affecting the inflation outlook (including potential supply chain disruptions, fiscal spending, and energy price fluctuations) are "roughly balanced," as the economic performance may be worse than currently assumed.
The strength of the euro could pose new challenges for policymakers. Since the beginning of the year, the euro has risen 14% against the dollar, reaching about 1.18. Some officials have warned that the pace of adjustment needs to be closely monitored. ECB Vice President Luis de Guindos even stated that if the exchange rate rises above 1.20, the situation could "become more complicated."
A strong currency lowers the prices of imported goods and reduces the competitiveness of exported goods, both of which can suppress inflation. However, Muller expressed that he is not overly concerned about these recent changes. He said, "The speed of the euro's appreciation is quite fast. But its exchange rate level is still within historical ranges. I believe we do not need to worry too much at this point."
