This photo taken on Jan. 30, 2025 shows the European Central Bank ECB headquarters in Frankfurt, Germany.
Zhang Fan/Xinhua via Getty Images
The European Central Bank should only enact one more quarter percentage point interest rate cut this year despite wider risks to economic growth, the International Monetary Fund’s Europe chief said Wednesday.
“We have a very clear recommendation for the ECB, what we saw so far is a huge success in the disinflation effort and monetary policy has worked … so we are expecting to sustainably hit the 2% inflation target in the second half of 2025,” Alfred Kammer, director of the European department at the IMF, told CNBC’s Carolin Roth.
“Our recommendation is there is room for one more 25 basis point cut, in the summer, and then the ECB should hold that 2% policy rate unless major shocks hit and there is a need for recalibrating monetary policy,” he added.
Kammer’s comments came during an interview on the sidelines of the IMF-World Bank Spring Meetings.
The ECB has reduced rates seven times in quarter point increments in its latest cycle, starting in June 2024. Its most recent move lower was last week, taking the deposit facility, its key rate, to 2.25%.
Inflation in the euro area cooled to 2.2% in March.
ECB President Christine Lagarde told CNBC in a Tuesday interview that the disinflation process in the euro zone was “nearing completion,” though stressed that risks remained — particularly given the uncertain landscape in which U.S. tariffs loom — and that the central bank would be “data dependent to the extreme” going forward.
Kammer told CNBC the IMF had made a “meaningful downgrade” in its growth outlooks for many developed economies.
For the euro area, Kammer said tariffs and trade tensions weighed more heavily on the outlook than were offset by recent developments on the fiscal side, including expectations for greater spending on defense and infrastructure in Germany to boost growth in the bloc.
