ECB’s Wunsch warns against excessive rate cuts

European Central Bank (ECB) policymaker Pierre Wunsch cautioned that the eurozone risks “sleepwalking” into excessive interest rate cuts and should be prepared to pause soon, Reuters reported, citing the Financial Times on Monday.

Wunsch, who is also the governor of the Belgian central bank, said he was “relatively comfortable” with market expectations of a 2 per cent interest rate by year-end, within a 50-basis-point margin. However, he warned against automatic cuts, stating, “If the data justify a new cut, we’ll cut. If they don’t, we might have to pause.”

The ECB has cut rates five times since June, most recently lowering its deposit rate to 2.75 per cent in January. While policymakers signal further easing, Wunsch highlighted uncertainty over whether rates remain restrictive for growth and inflation.

Attribution: Reuters

Subediting: Y.Yasser