LISBON (Reuters) – Euro zone inflation is slowing and is nearing the European Central Bank’s (ECB) 2% target. Mario Centeno, an ECB policymaker, warned that the risk now is falling short of this goal.
He advocated for a “steady reduction in interest rates” towards a neutral level of about 2% or slightly lower, noting that the current rate of 3.25% is still high.
Centeno emphasized the need to assess data like the labor market to determine if larger rate cuts are necessary.
The ECB has cut rates three times this year, and investors expect more cuts in upcoming meetings due to signs that inflation may decline faster than expected, while growth remains weak.
Centeno expressed concern about the risks of inflation falling below the target, citing underlying factors in projections.
He noted early signs of a weakening labor market and reduced confidence among consumers and investors in Europe, stating, “The European economy is not investing and so it is not growing.”
`
