German ECB Governing Council member Joachim Nagel in an interview with Platow Brief, highlighted persistent services inflation and a “high level of uncertainty,” referencing concerns about global trade dynamics as Donald Trump prepares to return to the White House next week.

“We should therefore not rush into anything on the path to monetary policy normalization,” Nagel stated.

Meanwhile, he defended the ECB’s discussions of a more aggressive 50-basis-point rate cut during its December meeting, noting that such debates are a normal part of policy deliberations.

ECB Executive Board member Frank Elderson emphasized the delicate balance the central bank must strike in setting interest rates during an interview with Het Financieele Dagblad.

He warned, “If we lower the interest rate too quickly, dialling down services inflation sufficiently could become complicated.” At the same time, he acknowledged the risks of maintaining rates too high for too long, which could lead to undershooting ECB’s inflation target.

“The markets don’t think we’ve finished easing now that we’re at 3% and I don’t think we have, either,” he added. “Setting interest rates is ultimately a question of how fast and how much.”

ECB’s December 11–12 meeting minutes noted that while the 25 bps rate cut decided at the meeting was widely supported, some members argued for a more aggressive 50 bps reduction.

Some policymakers contended that a larger rate cut would have better addressed Eurozone’s weakening economic projections, with one noting that “successive projection exercises have shown increasing downside risks to growth.”

However, the majority concurred that a smaller, measured cut aligned with the “controlled pace of easing” and provided a “sense of the direction” of the path of interest rates.

The minutes emphasize while projections were conditional on a further rate cut in January, the meeting underscored that “data dependency precluded any foregone conclusions.”

The minutes also stated that the “measured pace of interest rate cuts” was essential to ensure that ECB could “pass critical checkpoints to verify disinflation remains on track.” Furthermore, it was highlighted that optionality must be preserved to address risks that could derail inflation stabilization, including geopolitical tensions, global trade disruptions, and energy price volatility.

Nevertheless, “if the baseline projection for inflation is confirmed over the next few months and quarters,” the minutes noted, a “gradual dialing back of policy restrictiveness” would be appropriate.

Full ECB meeting accounts here.

ECB Vice President Luis de Guindos highlighted today that disinflation in the Eurozone is “well on track,” reinforcing optimism about the region’s progress toward price stability. While December’s inflation rose to 2.4%, Guindos noted that this increase was anticipated and aligned with ECB’s projections. Domestic inflation remains elevated, but recent easing signals have provided some relief.

Guindos cautioned, however, that risks remain high. “The high level of uncertainty calls for prudence,” he said, referencing global trade frictions that could fragment the global economy further. He also warned about the fiscal policy challenges to weigh on borrowing costs and renewed geopolitical tensions to destabilize energy markets.

Despite weak near-term economic outlook, Guindos expressed cautious optimism, stating, “The conditions are in place for growth to strengthen over the projection horizon, although less than was forecast in previous rounds.”

Meanwhile, French ECB Governing Council member François Villeroy de Galhau echoed a positive sentiment, emphasizing progress against inflation.

“We have practically won the battle against inflation,” he said, projecting that it “makes sense for interest rates to reach 2% by the summer.” However, Villeroy also highlighted risks to France’s 2025 growth forecast of 0.9%, acknowledging that while downside risks persist, a recession remains unlikely.