ECB Governing Council member François Villeroy de Galhau expressed increased confidence in the inflation forecast today, noting that the frequency of data surprises has diminished.

“As data surprises are now smaller and revisions to the current assessment more minor compared to two years ago, we are gaining more confidence in the forecast and more scope to disregard smaller bumps in the disinflation process,” he said.

ECB projects inflation to remain above its 2% target for the rest of this year. However, it anticipates that inflation will start easing next year and reach the 2% target by the end of 2025.

ECB Governing Council member Peter Kazimir suggested today that “we could expect one more interest-rate cut this year.” He underscored his continued concern over the “significant risk of rising inflation,” driven primarily by wage growth.

Kazimir reiterated his opposition to an interest-rate adjustment at upcoming July meeting. Instead, he advocated for policymakers to wait until the next round of quarterly economic projections before making any decisions.

“It’s appropriate to wait for the September forecast,” Kazimir stated. “Those are the right moments to make the correct decisions.”

Speaking today, ECB Governing Council member Fabio Panetta noted that the current macroeconomic conditions support “normalization of the monetary stance.” He added that ECB initiated this process recently and, under the “baseline scenario,” intends to continue it “gradually and smoothly.”

However, Panetta cautioned that the inflation and growth projections represent only one of many possible outcomes. He stressed that monetary policy must also manage “risks and tail scenarios,” not just baseline forecasts. The prevailing political and geopolitical risks, he said, necessitate “awareness, flexibility, and state-contingent action plans.”

Panetta’s comments come just days before French voters head to the polls for the first round of parliamentary elections. He highlighted the potential economic implications of political turnover, explaining that it inherently brings policy uncertainty. This uncertainty affects households and investors as they try to predict how new governments will handle critical economic and political decisions.

In an interview today, ECB Governing Council member Olli Rehn indicated that market data suggests the likelihood of two additional rate cuts, bringing the rate to 3.25% by the end of the year. He also noted that the terminal rate for this easing cycle is expected to fall between 2.25% and 2.50%. Rehn described these projections as “reasonable expectations.”

Despite recent economic data overshooting expectations, Rehn affirmed that “disinflationary process is going on,” although it may be bumpy. He added that ECB would maintain its course and “continue rate cuts” to ensure this process remains on track.

Rehn further elaborated that current interest rates are still in “restrictive territory,” underscoring ECB’s work to ensuring that the “disinflationary process will continue.” He stressed that the central bank’s primary goal is to control inflation, but also highlighted its broader responsibilities.

“Without compromising our primary objective,” Rehn said, “we also have a responsibility to support full employment, sustainable development, and balanced growth.”