Is the European Central Bank Prepared to "Ease Monetary Policy"? Vice President Says: Inflation Target is Expected to be Achieved Soon

Luis de Guindos, Vice President of the European Central Bank (ECB), recently stated that the bank is not far from achieving its 2% inflation target, thanks to the strengthening of the euro and a decline in energy costs.

On Wednesday (May 21) local time, during an interview with the media, De Guindos said that the strengthening of the euro and the decline in energy costs would exert "downward pressure" on consumer prices in the eurozone.

He added that while the overall impact of the US tariff hikes on inflation remains unclear, it cannot be ruled out that this could "ultimately" lead to a slowdown in price growth in the eurozone. "The process of disinflation is ongoing, and we will soon be able to achieve our definition of price stability on a sustainable basis," he said.

Currently, the market widely expects the ECB to cut interest rates again in June and may remain open to further policy easing.

The day before, Pierre Wunsch, a member of the ECB's Governing Council and Governor of the National Bank of Belgium, also told the media that a policy of "moderate easing" might be needed to safeguard economic recovery and prevent inflation from falling below 2%. He described the market's expectation of a final interest rate of 1.75% in 2025 as "reasonable."

The eurozone's inflation rate remained at 2.2% in April, primarily due to an increase in core prices. However, analysts expect a pullback in May, when it may fall below 2%. This week, the European Commission forecast that consumer price growth would reach 2.1% this year and could fall to 1.7% in 2026.

De Guindos also pointed out that the EU has revised down its economic growth forecast for 2025, adding that the ECB would "likely adjust in this direction" in its new round of quarterly forecasts to be released in June.

"We made it very clear in March that the risks to growth were tilted to the downside. I can now confirm that many of the risks we identified at that time have materialized," he said.

Earlier in the day, the ECB released its semi-annual Financial Stability Review. The report warned that heightened investor concerns about risks associated with US products could further shock the global financial system.

However, some European officials also believe that this moment could be an opportunity to enhance the international status of the euro. De Guindos commented, "Whether we can seize this opportunity is up to us."

If major European institutions implement relevant policies, such as advancing the Capital Markets Union, the Banking Union, and the Single Market, the role of the euro in the global economy will certainly become increasingly important, and we will also gain more market share.