Published by Global Banking & Finance Review®
Posted on July 1, 2025
2 min readLast updated: January 23, 2026
Add as preferred source on GoogleECB can pause rate changes as inflation hits target, says Müller. Growth recovers, euro appreciates. Risks balanced, policy on hold.
By Balazs Koranyi
SINTRA, Portugal (Reuters) -The European Central Bank can afford to wait a while before contemplating any further change in interest rates, and it is not obvious the bank should ease much more in the current cycle, Estonian policymaker Madis Müller said on Tuesday.
The ECB has cut its benchmark deposit rate by a combined 2 percentage points since last June but it has signalled a pause for July and financial investors are expecting an even longer break, anticipating just one more cut towards the end of the year.
"It makes sense for policy to stay on hold for a while," Müller told Reuters on the sidelines of the ECB Forum on Central Banking in Sintra, Portugal.
"It’s reasonable not to change rates in July," Müller said. "While it’s too early to discuss the autumn, it’s also reasonable to assume that we should not go much lower during the current cycle, unless the euro area economy will turn out to be much weaker than we expect."
The ECB can afford to take its time because inflation has essentially reached its 2% target, growth is recovering and interest rates are no longer a drag on economic growth.
However, trade negotiations with the United States and prospects for greater military and infrastructure spending, particularly in Germany, could materially alter the outlook, so policymakers are well advised to take their time until there is greater clarity.
The ECB can also sit tight because risks around the inflation outlook are broadly balanced - a rare moment for the bank, which has spent the last decade first fighting excessively low and then exceptionally high inflation.
The euro's rapid appreciation could weigh on price growth, however, and prove a drag on exporters' profitability. But Müller said things were not at a level that would have him concerned.
The euro was trading just above 1.18 against the dollar on Tuesday, its highest level since the autumn of 2021 and well above the 1.02 in early 2025, before the Trump administration's erratic policies turned the dollar's fortunes around.
"The euro exchange rate against the dollar is well within the historical range," he said. "The appreciation this year has indeed been quick but we’re not at a level where I am particularly concerned."
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)
Müller stated that the ECB can afford to wait before making further changes to interest rates, suggesting it makes sense to keep rates on hold for a while.
Inflation has essentially reached the ECB's 2% target, allowing the bank to take its time with policy changes as growth is recovering and rates are no longer a drag.
Müller noted that while the euro's rapid appreciation could impact price growth and exporters' profitability, he is not particularly concerned about its current level.
Trade negotiations with the United States and potential increases in military and infrastructure spending in Germany could materially alter the ECB's outlook.
The euro was trading just above 1.18 against the dollar, its highest level since autumn 2021, indicating a significant appreciation from earlier levels.
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