(Reuters) – European Central Bank policymaker Pierre Wunsch said the euro zone faces the risk of “sleepwalking” into excessive interest rate cuts and must be prepared to stop soon, the Financial Times reported on Monday.
The Belgian central bank governor said he felt “relatively comfortable” with the market expectation of 2% rates by the end of the year “give or take 50 basis points,” the FT said.
On Jan. 30, the ECB cut its deposit rate by 25 basis points to 2.75%, and policymakers guided for a further reduction in March as concerns over lacklustre economic growth supersede worries about persistent inflation.
“I’m not pleading for a pause in April but we must not sleepwalk to 2% (interest rates) without thinking about it. If the data justify a new cut, we’ll cut. If they don’t, we might have to pause,” the Financial Times quoted Wunsch as saying on Friday.
He also highlighted growing uncertainty over the appropriate level of interest rates, saying he was “not even sure” whether rates remained restrictive for growth and inflation.
The ECB has cut interest rates five times since last June and policymakers are increasingly vocal in their debate about just how much farther rates must come down when inflation is still a bit too high but economic growth is barely above zero.
(Reporting by Surbhi Misra in Bengaluru; Editing by Tom Hogue and Kim Coghill)
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