At Thursday’s European Central Bank (ECB) meeting, some policymakers suggested removing the bank’s commitment to keeping interest rates high for an extended period, according to five sources familiar with the discussions.
The push to revise the stance came as inflation forecasts have begun to show signs of easing, with some ECB officials believing that inflation could stabilize at the bank’s 2% target sooner than previously expected.
While the proposal did not gain broad support, it highlights a growing shift within the ECB from focusing on fighting inflation to addressing lackluster economic growth. The bank’s decision to cut interest rates for the third time this year reflects this ongoing debate, though the majority of governors maintained the need for restrictive borrowing costs.
The discussion around inflation and policy direction follows ECB President Christine Lagarde’s comments that inflation would likely fall to 2% “in the course of next year,” a slightly more optimistic timeline compared to her earlier prediction of a decline in the second half of 2024. New projections will be provided at the bank’s next policy meeting on December 12.
While Lagarde refrained from indicating future rate cuts, insiders suggest that a fourth rate reduction in December is possible if economic conditions do not significantly improve in the coming weeks. However, external factors such as the outcome of the US elections and potential new trade tariffs under a Donald Trump presidency remain significant uncertainties that could influence the ECB’s next moves.
The internal discussions about easing tight monetary policy come at a time when the ECB is trying to balance inflation control with the need to revive the sluggish eurozone economy.
