ECB's Stournaras: As Growth Risks Intensify, Keep Easing Policy on Track

Remarks of Officials

Summary:

Greek central bank chief Yannis Stournaras argued that it is premature to discuss pausing interest rate cuts, especially given the current economic pressures and the gradual easing of price pressures.

On February 25, 2025, Yannis Stournaras, Greek central bank chief, delivered a speech, stating:

"I don't think that our next meeting is the right moment to discuss pausing. It is too early for that," Stournaras told. "The economic growth will stay weak and that inflation will fall back to target this year. If the situation continues like that, we should definitely bring interest rates down further." The ECB has cut its key deposit rate from a record-high 4 percent to 2.75 percent today, but"we are definitely still in restrictive territory."

Inflation has declined significantly and is expected to reach the ECB's target level this year. While some analysts predict further rate cuts in 2026, "whatever we say now about 2026 is going to be very premature." he said. "Given the information we currently have, I expect that interest rates will reach 2 percent by the autumn of this year and that this is likely to be the terminal rate."

The labor market remains sluggish, with long-term uncertainties. Despite stable unemployment rates, weak growth remains a persistent challenge. The ECB is unlikely to have a clear view by March 6 of how the new U.S. administration's policies, specifically regarding trade tariffs, will affect the Eurozone economy, Stournaras said.

Overall, the ECB will continue its accommodative monetary policy stance until economic recovery and inflation targets are achieved. Amid the current uncertain global environment, Europe needs to further strengthen its economic and defense independence to address potential future risks and challenges.

His comments amount to a clear disagreement with board member Isabel Schnabel, who last week said the ECB's Governing Council should start to debate whether to "pause or halt" rate cuts when it next meets on March 6.

Schnabel had indicated that the timing to halt rate cuts might be approaching. However, Stournaras argued that his views within the ECB Governing Council appear to be in the minority. In recent weeks, several officials, including ECB President Christine Lagarde, Madis Muller, Gediminas Simkus, and Joachim Nagel, have all supported a slower pace of rate cuts, suggesting that "summer would be a more appropriate time for further rate cuts." This indicates that discussions on pausing rate cuts may soon be on the agenda.

ECB's Stournaras

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Cryptocurrency

Key Highlights

Bitcoin price declined heavily and even traded below the $90,000 support.

BTC is now following a connecting bearish trend line with resistance at $91,600 on the 4-hour chart.

Ethereum price also declined and traded below the $2,500 support.

XRP dipped toward $2.00 before the bulls appeared.

Bitcoin Price Technical Analysis

Bitcoin price made a couple of attempts to settle above $100,000 against the US Dollar. However, BTC failed and started a fresh decline.

Looking at the 4-hour chart, the price gained bearish momentum after it broke the $95,000 support zone. There was a close below the $92,000 level, the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour).

The bears even pushed the price below the $90,000 mark. A low was formed at $86,736 and the price is now consolidating losses. On the upside, the price could face resistance near the $90,000 level.

The next key resistance is $91,500. There is also a connecting bearish trend line forming with resistance at $91,600 on the same chart. It is close to the 38.2% Fib retracement level of the downward move from the $99,502 swing high to the $86,736 low.

A successful close above $91,600 might start another steady increase. In the stated case, the price may perhaps rise toward the $93,000 level. Any more gains might call for a test of $95,000.

Immediate support is near the $87,200 level. The next key support sits at $86,650. A downside break below $86,650 might send Bitcoin toward the $85,000 support. Any more losses might send the price toward the $83,200 support zone.

Looking at Ethereum, there was a fresh bearish reaction and the bears pushed the price below the $2,500 support zone.

Today’s Economic Releases

US New Home Sales for Jan 2025 (MoM) – Forecast +0.2% versus +3.6% previous.

Source: ACTIONFOREX

To stay updated on all economic events of today, please check out our Economic calendar

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FED

Remarks of Officials

On February 25, 2025, Tom Barkin, President of the Federal Reserve Bank of Richmond, delivered a speech detailing the following:

The economy is in a good place. Recession fears have dissipated. GDP grew 2.5 percent last year, a healthy level. Strong consumer spending, a rebound in business investment, and rising asset prices have collectively supported this growth. Over the last few years, we've seen the pandemic and geopolitical conflict expose the vulnerabilities associated with globalization. However, supply chain bottlenecks have gradually eased, and firms have adapted to the new market environment through productivity gains. These factors have enabled the economy to maintain stable growth.

Inflation has shown a clear downward trend but remains above the Fed's 2% target. The headline Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation measure, has declined significantly from its peak but still lags behind the target. The January Consumer Price Index (CPI), which places a higher weight on housing costs, may have overstated the overall inflation level.

The labor market remains robust. Unemployment is at 4.0 percent, near most estimates of its natural rate. Firms continue to hire, wages are growing steadily, and the labor force participation rate is gradually recovering.

Businesses are leveraging automation and process optimization to enhance productivity, alleviating pressures from labor shortages. However, In the long run, the U.S. labor market may face structural challenges such as an aging population, declining birth rates, and uncertainties in immigration policy. These factors could lead to a reduction in future labor supply, thereby pushing up wage costs and exerting new upward pressure on inflation.

Monetary policy should remain cautious and avoid premature easing. With price levels still above target, the Federal Reserve needs to maintain a modestly restrictive stance to ensure that inflation does not rebound. Historical experience has shown that easing policy too early can allow inflation to resurge, thereby undermining economic stability.

The current economic environment remains fraught with uncertainties that could impact future inflation trends. Geopolitical conflicts, trade policy adjustments, changes in immigration policy, and volatility in energy markets all pose potential risks. In this context, the Fed must adopt a “wait-and-see” approach, closely monitoring economic data to ensure that policy adjustments align with the evolving economic landscape.

In summary, the Fed will continue to remain vigilant to avoid reigniting inflation through premature rate cuts. With solid economic growth, a strong labor market, and inflation trending downward but still requiring attention, maintaining a moderately restrictive monetary policy stance is prudent until there is greater confidence that inflation will sustainably return to the 2% target.

Fed's Barkin

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Owen Li

Economic

AUD/JPY holds ground following the release of the monthly Consumer Price Index.

Australia’s monthly CPI rose by 2.5% YoY in January, compared to an anticipated 2.6% growth.

The Japanese Yen may find support from rising bets of more BoJ’s rate hikes.

AUD/JPY maintains its position after registering losses in the previous session, trading around 96.50 during the Asian hours on Wednesday. However, the upside of the currency cross could be restrained after Australia’s monthly Consumer Price Index (CPI) showed a 2.5% year-over-year rise in January but fell short of market expectations for 2.6% growth.

Attention turns to potential updates from China’s Ministry of Commerce on talks between China’s Vice Commerce Minister and US business leaders regarding tariffs. A Bloomberg report on Tuesday revealed that the Trump administration plans to tighten chip export controls on China — a key trading partner for Australia. The US is reportedly considering stricter restrictions on Nvidia chip exports and additional limitations on Chinese firms like SMIC and CXMT.

The Japanese Yen (JPY) may find support amid a global risk-off mood and growing expectations of further interest rate hikes by the Bank of Japan (BoJ). The BoJ is expected to raise rates from 0.50% to 0.75% this year. According to Bloomberg, overnight index swaps fully price in a rate hike by September, with a 50% chance of an earlier move as soon as June.

Meanwhile, traders in Japan are preparing for a series of key economic reports set to be released on Friday. These reports — covering industrial production, retail sales, and Tokyo inflation — could offer crucial insights into the BoJ’s future monetary policy direction.

Source: FXSTREET

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Alex

Economic

Forex

The Pound Sterling (GBP) rose 0.37% to 1.2669 after rebounding from a two-day low of 1.2605, as the US Dollar weakened due to falling US Treasury yields. Market sentiment turned negative following US President Trump’s renewed tariff threats on Canadian and Mexican goods. Weak US economic data also weighed on the Dollar, with the 10-year Treasury yield dropping 10 basis points to 4.30%. US home prices rose 4.5% year-over-year in December, slightly higher than November’s 4.3%. The Confederation of British Industry in the UK reported that retailers plan to cut investments due to weak spending and high prices. A Reuters poll suggests the Bank of England (BoE) will likely keep rates steady at 4.50% in March, possibly cutting to 4.25% in Q2. Traders now await comments from BoE’s chief economist, Huw Pill.

GBP/CHF – H4 Timeframe

The highlighted demand zone on GBP/CHF’s 4-hour timeframe chart is the result of a bullish SBR pattern, with confluences from the 61% Fibonacci retracement level, 200-period moving average support, and trendline support. An FVG near the demand area lends further credence to the bullish sentiment.

GBPCHF – H3 Timeframe

The 3-hour timeframe chart of GBP/CHF shows the SBR pattern in more detail, with the induced low visibly retracing before filling up the FVG area. The reaction from the confluence of the demand zone, the trendline support, and the 61% Fibonacci retracement level is expected to push prices to create a new higher high.

Analyst’s Expectations:

Direction: Bullish

Target- 1.14218

Invalidation- 1.12162

Source: ACTIONFOREX

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ECB

Remarks of Officials

Isabel Schnabel, Member of the Executive Board of the European Central Bank (ECB), spoke at the Bank of England Conference in London on February 25, 2025, as follows:

The global economic growth potential is undergoing a structural adjustment. In recent years, factors such as geopolitical fragmentation, climate change and labor shortages are having a profound impact on economic growth patterns. Whereas in the past the global economy suffered from a "savings glut", which led to low long-term interest rates, the current trend of widening fiscal deficits and central bank balance sheet normalization is driving a "bond glut", which in turn is raising long-term real interest rates. Current long-term real interest rates in the euro area are already much higher than in most of the period following the 2008 financial crisis, suggesting that growth may face new constraints and that the economic environment ahead will be different from that of the past decade.

High inflation risks remain, and the global economy has departed from the prolonged low-inflation environment of the past. The recent spike in inflation may have permanently altered consumer and business expectations, making it easier for businesses to pass on cost increases to consumers and thus exacerbating inflation stickiness. In addition, global supply chain adjustments, the trend towards de-globalization and uncertainty in energy markets could create long-term upward inflationary pressures.

Labor shortages coexist with structural changes. In recent years, the global balance between labor supply and demand has shifted, with some industries experiencing chronic labor shortages. Population ageing, changes in immigration policies and labor market adjustments brought about by technological change are likely to affect future job market conditions. In addition, the structural tightening of the labor market is still likely to exert long-term pressure on wages and the level of inflation, a trend that central banks will need to monitor closely.

Overall, the global economy is currently undergoing profound changes and central banks need to adapt to the new situation. The post-pandemic economic environment has been different from that of the past decade, and the rise in the level of long-term real interest rates is likely to be a persistent trend. Therefore, central banks need to be more cautious in adjusting their policies, keep a constant watch on the dynamics of the global market, and take appropriate measures when necessary to ensure the long-term stable development of the economy.

ECB's Schnabel

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[Quick Facts]

Israel: Hamas faces three options—disarmament, extended ceasefire, or resumption of war.

Barkin: Maintaining moderately restrictive stance is reasonable.

Trump directs government to consider possible tariffs on copper.

Schnabel: Caution on rate cuts; neutral rate likely higher.

ECB's Stournaras: It is too early to discuss pausing cuts.

[News Details]

Israel: Hamas faces three options—disarmament, extended ceasefire, or resumption of war

On Tuesday, Israeli government officials stated that once the first phase of the ceasefire agreement in Gaza is completed, with all detained personnel transferred, Hamas will face three options. First, it can accept Israel's conditions, including disarmament and relinquishing administrative control over Gaza. Second, it can continue releasing detainees to extend the ceasefire. Third, it can end the ceasefire and resume full-scale war.

Barkin: Maintaining moderately restrictive stance is reasonable

Richmond Federal Reserve President Thomas Barkin emphasized that the U.S. economy is in good shape, with a solid labor market and the dissipation of recession fears. However, significant uncertainties persist, making it difficult to make major adjustments to monetary policy in the near term. Barkin highlighted the need to observe how these uncertainties evolve and how the economy reacts.

Barkin acknowledged that the U.S. economy has been making progress in suppressing inflation but warned of potential risks that could push prices upward. Factors such as changes in global supply chains, a declining U.S. population and labor force, and rising budget deficits due to an aging population and increased defense spending could potentially lead to a resurgence in inflation. If such a scenario materializes, the Federal Reserve may need to consider rate hikes to counteract rising prices. However, he cautioned that the outlook remains uncertain, and policymakers must remain vigilant. Barkin suggested that the U.S. central bank's benchmark policy rate should stay restrictive until it is more certain that inflation is returning to its 2% target.

Following three consecutive rate cuts in the second half of 2024, Federal Reserve officials have generally expressed caution regarding the timing of further rate cuts. They cited stubborn inflation data, a strong underlying economy, and uncertainties surrounding President Trump's economic policies as reasons to remain patient with further rate adjustments.

Trump directs government to consider possible tariffs on copper

In his latest move targeting global trade norms, President Donald Trump has ordered a new investigation into potential tariffs on copper imports, aiming to revitalize U.S. copper production. Copper is a critical material for electric vehicles, military hardware, semiconductors, and a wide range of consumer goods.

Trump signed a directive instructing Secretary of Commerce Lutnick to initiate a national security investigation under Section 232 of the Trade Expansion Act of 1962. The same legal provision was used during Trump's first term to impose a 25% global tariff on steel and aluminum.

A White House official stated that any potential tariff rates would be determined by the investigation, adding that Trump prefers tariffs over quotas. According to U.S. data, the countries most affected by potential U.S. copper tariffs would be Chile, Canada, and Mexico, which are the top suppliers of refined copper and copper products. The official also noted that forecasts based on demand for electric vehicles and artificial intelligence suggest a future copper shortage.

Schnabel: Caution on rate cuts; neutral rate likely higher

European Central Bank Executive Board member Isabel Schnabel has warned that the ECB should proceed cautiously with further interest rate cuts, as current borrowing costs may already be near a level that no longer restrains economic activity. She emphasized that the so-called neutral rate, which neither stimulates nor restricts growth, has likely increased in recent years. The Eurozone's economic stagnation does not necessarily indicate that monetary policy is still suppressing expansion. She has warned that the ECB should proceed cautiously with further interest rate cuts. The data show the degree of restriction has significantly diminished, to a point where policymakers can no longer confidently assert that monetary policy remains restrictive. She said, "I'm no longer sure whether it is still restrictive. What I'm saying is I'm no longer sure whether it is still restrictive."

ECB's Stournaras: It is too early to discuss pausing cuts

Yannis Stournaras, the Governor of the Bank of Greece and a member of the ECB Governing Council, stated on Tuesday that the ECB's monetary policy continues to restrain economic activity, necessitating further easing. "I don't think the next meeting is the appropriate time to discuss a pause in rate cuts. We are still in restrictive territory," he said. Given the current information, Stournaras expects interest rates to reach 2% by the fall of this year, which he believes could be the terminal rate.

Stournaras' remarks are a clear response to the recent calls from ECB Executive Board member Isabel Schnabel, who suggested that the timing to halt rate cuts may be near. However, Schnabel's view appears to be in the minority within the 26-member ECB Governing Council. As inflation continues to trend downward toward the 2% target and the Eurozone economy remains sluggish, most members support further policy easing.

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