Inflation in the eurozone may fall below the 2% target, Bank of Greece governor, Yiannis Stournaras, said in an interview with Platow.de.
As he said, “new indications of weak economic activity and the high level of uncertainty are very likely to drive inflation to a lower-than-expected level. This means that there is a risk that inflation will fall below the 2% target in the medium term.”
Two more reductions
Asked whether the European Central Bank will proceed with a new reduction in interest rates in September, Stournaras said: “The decision will depend on the data. As President Lagarde has emphasized, we are not just relying on isolated figures. We are considering all available information.”
He reiterated that he expects the ECB to proceed with two interest rate cuts this year, provided that the de-escalation of inflation continues as we expect. “We are on the right track. In addition, growth is weaker than expected, which also argues in favor of lowering interest rates,” he said.
He expressed his concerns about the developments on the recovery course, stating that if the new US government implements the threat of imposing duties, it is possible that there will be even greater fragmentation of the global economy and the pressure towards stagflation will intensify, i.e. a combination of inflationary pressure and weak economic growth.
