Has the European Central Bank's interest rate cut cycle ended? Divergence among committee members becomes apparent, and December's economic forecast becomes a key basis

According to the Zhitong Finance APP, officials from the European Central Bank are anxiously awaiting the new round of economic forecasts to be released in December, which will help them determine whether the current interest rate level is low enough to sustainably achieve the 2% inflation target.

During the meeting of European finance ministers held in Copenhagen, participating decision-makers expressed confidence that the current 2% deposit facility rate is suitable for achieving this target. However, there are differing opinions on how to assess the severity of risks facing the economic outlook and the tolerance for inflation being below target in the short term. European Central Bank President Christine Lagarde stated that the ECB has achieved its goal of price stability, but uncertainties remain despite reaching a trade agreement with the United States.

The European Central Bank kept interest rates unchanged at its rate meeting in early September, stating that monetary policy is in a "good place." This statement led economists and traders to lower their expectations for further rate cuts by the ECB. The forecasts supporting this rate decision indicate that the price increase in 2027 will be 1.9%, slightly below the ECB's target. The new round of forecasts to be released in December will include growth and inflation outlooks for 2028 for the first time.

Below are summaries of recent interviews with several members of the ECB Governing Council.

Latvian Central Bank Governor Martins Kazaks

Martins Kazaks believes that the ECB cannot precisely maintain a 2% inflation level at all times, and it is inappropriate to adjust interest rates every time there is a deviation from the target. He stated, "We do not need to rush. As a central bank, we should not jump around at every meeting. If necessary, we will adjust interest rates, but for now, we have achieved the 2% target." "This means that the threshold for adjustment in October is quite high. The December meeting will have more data to support it, especially the new forecasts."

Greek Central Bank Governor Yannis Stournaras

Yannis Stournaras stated, "Overall, considering the uncertainties, we are currently in a good balance—not a perfect balance, but good enough. There is currently no reason to take action on interest rates." He mentioned that the ECB still relies on data, but the threshold for further rate cuts is high, "If we find that the situation has changed at the monetary policy meeting, we will also change, but it must be a substantial change in the outlook to alter our position." He added, "Currently, we believe that inflation in 2028 will be close to 2%, but slightly below rather than above, which is somewhat concerning, but not a serious issue for now. If the results are significantly below the target, that would be worth paying attention to."

Maltese Central Bank Governor Edward Scicluna

Edward Scicluna stated, "If the situation remains the same, it can be said that the current interest rate level is appropriate. We have not discussed whether there will be another rate cut in October or December, or even no cut at all." He pointed out that decision-makers will closely monitor trade tensions and the euro exchange rate, but will also consider the resilience shown by the European economy so far and the upcoming increase in fiscal spending. He stated, "Currently, we do not see inflation declining further from its current level. This could be a risk, but we need to wait and see." Governor of the Bank of Lithuania Gediminas Simkus

Gediminas Simkus stated: "From a risk management perspective, lowering interest rates is better than not lowering them. This is beneficial for the inflation target and the economy, so we should take action in December and then observe." "It is hard to imagine that medium-term inflation will not be below our target. I fully expect that the forecast for 2028 will be below 2%. It is difficult to envision a scenario where inflation is above the target." He pointed out that imports from China and a strengthening euro are putting downward pressure on prices, and some countries may not implement the new carbon emissions trading system as planned, which will further suppress inflation.

Governor of the Bank of Estonia Madis Muller

Madis Muller stated: "Currently, interest rates provide slight support for growth, and inflation levels are where we want them to be, so I believe we do not need to take further action. Future growth will be driven by domestic demand."

Governor of the Bank of Portugal Mario Centeno

Mario Centeno stated: "We can tolerate a few quarters of inflation below the target, but at some point, we must take action; otherwise, if inflation remains below the target for a long time, it may lead to a de-anchoring of inflation expectations. Sustained inflation below the target is not our goal and does not align with our mission."

He pointed out that the inflation forecast for 2027 is only 1.9%, due to the impact of the new carbon emissions trading system, while there is also a greater risk of deviating from 2%. He stated: "Politically, it is uncertain whether this policy will really be implemented, and it will only have a one-time impact. So in the current context, I see inflation in 2028 being below 2%, which is the medium-term level in the December forecast." "If growth is below potential, inflation will soon fall below the target and remain low for a period of time. I still believe that the possibility of further easing monetary policy is greater."