The European Central Bank (ECB) still has room to take a cautious approach before considering any further changes to interest rates, according to Estonian policymaker Madis Müller, who suggested that the bank may not need to ease policy significantly in the current cycle.
Speaking at the ECB Forum on Central Banking in Sintra, Portugal on Tuesday, Müller told Reuters that “it is reasonable to keep the current policy in place for the time being.”
“It is reasonable to leave rates unchanged in July,” Müller said. “While it is still too early to talk about autumn, it is reasonable to expect that we will not need to cut rates further in this cycle unless the eurozone economy becomes significantly weaker than expected.”
Several factors support the ECB’s cautious approach. Inflation is now close to the bank’s 2% target, economic growth is recovering, and current interest rates are no longer detrimental to growth.
However, the economic outlook could change significantly depending on the outcome of trade talks with the United States and the possibility of increased military and infrastructure spending, especially in Germany. These factors suggest that policymakers should wait until there is more clarity.
Müller also said that inflation-related risks are now balanced – a rare situation for the ECB, which has struggled with inflation that is either too low or too high for years.
A sharp rise in the euro could also weigh on price growth and exporters’ profits. On Tuesday, the euro traded just above 1.18 against the US dollar, its highest level since autumn 2021 and well above the 1.02 it hit in early 2025. However, Müller did not show any major concerns.
“The euro-dollar exchange rate is still within its historical range,” he said. “The increase this year has been rapid, but it has not reached the level that worries me.”
