Interview of the Bank of Greece Governor Yannis Stournaras to "Econostream" with David Barwick
23/12/2025 - Articles & Interviews
“We must preserve optionality and stand ready to move our policy rates in either direction.”
The European Central Bank must remain in an attitude of readiness to adjust its interest rates either up or down as circumstances require, according to ECB Governing Council member Yannis Stournaras.
In an interview with Econostream, Stournaras, who heads the Bank of Greece, called current ECB interest rates “well-calibrated and fully consistent with our unwavering commitment to the symmetric 2% inflation target.”
The updated macroeconomic projections show inflation developments ahead to be “broadly in line with this objective, with no material likelihood of persistent overshooting or undershooting, until the end of the projection horizon,” he said.
The ECB was thus in a “good place” at present, he said, given that “inflation remains on track to reach our 2% target in the medium term, although the projections show a slight undershooting in 2026 and 2027.”
“The key takeaway from the projections is that the euro area economy shows resilience,” he added.
All the same, he noted, “being in a ‘good place’ does not imply that policy rates are locked in.” Monetary authorities have an eye on the risks around medium-term inflation and are prepared to react quickly, he said.
“We have to preserve optionality and stand ready to move our policy rates in either direction, maintaining a data-dependent, meeting-by-meeting approach,” he said.
“That means we continue to base our decisions on all incoming information, without pre-committing to a specific rate path,” he said. “If we happen to be in a better or weaker position than expected, we will take appropriate action.”
Asked whether he agreed that the next rate move was likely to be up, Stournaras described the balance of risks to the economy as “two-sided” and said that given all the uncertainties, “it would be premature to draw firm conclusions about the future path of interest rates.”
The European Commission’s latest European Economic Forecast indicated slower potential growth in the coming years, suggesting that r* would also decline, he said. This however remained subject to much uncertainty and was therefore no basis for policy decisions, he said.
For now, Stournaras expressed optimism about euro area growth. “There are reasons to be confident that the economic prospects will further strengthen,” he said. “The euro area economy has shown remarkable resilience and is expected to grow steadily in the years ahead.”
Growth was supported by healthy domestic demand and a strong services sector, he said. Investment in technological and digital innovation as well as reforms to boost productivity were likely to contribute to growth ahead as well, he said.
“At the same time, substantial government spending on defense and infrastructure is expected to provide an important boost to economic activity,” he observed.
Still, there were challenges, he said, highlighting geopolitics and trade tensions. Although some trade agreements had been concluded, the full impact of higher tariffs, including on inflation, would only be felt over time, he said.
Citing the ECB’s recent Financial Stability Review, Stournaras warned that “present financial market pricing and subdued volatility seem out of sync with persistently elevated uncertainties.” All the same, it could not be excluded that pricing was actually correctly valuing the future contribution of AI, he said.
“All in all, we cannot be certain that future events will play out in a way that favors a particular interest rate trajectory,” he said. “In this environment of heightened uncertainty, our course is clear. We will continue to assess all incoming information, responding flexibly to future developments, whether they turn out to be positive or negative, always guided by our price stability mandate.”