Belgian ECB Governing Council member Pierre Wunsch said the central bank may need a “mildly supportive” stance, especially if Eurozone recovery continues to lag. In an interview with Reuters, Wunsch noted “If the recovery is delayed — and it has been delayed a few times — and output is below potential, then being supportive is rational,” he said.
Wunsch highlighted several disinflationary forces at play, including lower energy prices, the strength of Euro, subdued wage growth, and the lack of tariff retaliation. He also flagged cheap Chinese imports as a contributing factor to weakening price pressures. “All these factors combined suggest that the upside risk is limited and the overall risk is to the downside,” he added.
With markets pricing in one final 25 basis point cut later this year, bringing the deposit rate to 1.75%, Wunsch said he was not uncomfortable with that view. “I don’t disagree with market pricing for interest rates,” he noted.
