The Governor of the Central Bank of Ireland has warned that the risks to economic growth among countries which use the euro are “firmly to the downside”.
Gabriel Makhlouf made the remarks in a blog following the decision of the European Central Bank governing council, of which he is a member, to cut interest rates by a quarter of one percent yesterday.
The decision brings the ECB’s deposit rate to 2.75%.
Regarding future reductions, Mr Makhlouf said that the “direction of travel is clear”.
But he cautioned the ECB will approach interest rate cuts on a “meeting by meeting” basis.
Analysts expect the bank could bring rates down to 2%, or possibly 1.75%, this year.
Further interest rate reductions depend on inflation remaining under control.
Mr Makhlouf added there had been “continued progress in disinflation” and the bank was confident it would return to its target of 2% by the end of 2027.
The ECB has been battling inflation since it peaked at over 10% in 2022.
In response the bank hiked interest rates from about 0% to 4%, which immediately hit tracker mortgage customers with increased payments.
Inflation in the euro zone is now much lower, although it increased marginally from 1.7% in September to 2.4% last month following rises in energy prices.
Mr Makhlouf said the recent increase “highlights the need to continuously evaluate the incoming data carefully ahead of each policy meeting.”
