Published by Global Banking & Finance Review®
Posted on May 21, 2025
1 min readLast updated: January 23, 2026
The ECB might lower interest rates below the neutral level to maintain a 2% inflation target, according to Mario Centeno. Economic uncertainty persists.
LISBON (Reuters) -The European Central Bank may need to cut its key interest rate below the neutral level of 1.5%-2% to prevent inflation from falling below its 2% target in a frail economic setting, ECB policymaker Mario Centeno told a news briefing on Wednesday.
"We cannot run the risk of having a monetary policy that puts the inflation rate below the target of 2%," he said after presenting the Bank of Portugal's financial stability report.
The ECB interest rate, "in order to be able to keep inflation at the target of 2%, may have to come below the natural rate", he added, estimating the latter to be in the range of 1.5% to 2%.
In the face of a more uncertain environment due to the global trade tensions, "we must maintain an increasingly predictable approach and not take steps that create more uncertainty", he said, without specifying if the ECB should cut its rates again at its next meeting in June.
(Reporting by Sergio Goncalves, editing by Andrei Khalip)
The ECB may need to cut its key interest rate below the neutral level of 1.5%-2% to prevent inflation from falling below its 2% target.
Centeno estimates the neutral rate to be in the range of 1.5% to 2%.
In the face of global trade tensions, it's important to maintain a predictable approach to avoid creating more uncertainty.
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