Stournaras: Rate hikes mustn’t push eurozone into recession

The recent drop in eurozone inflation is fueling optimism, Greek central bank chief Yannis Stournaras said on Thursday, suggesting that interest rates may not have to be raised to a level that pushes the bloc into recession. 

Stournaras, considered a “dove” on the ECB’s Governing Council, said that data points to easing inflation pressures and a modest expansion in economic activity. 

Eurozone inflation fell to 8.5% last month from a peak of 10.6% in October and ECB board member Fabio Panetta predicted on Thursday that it could be under 3% by the close of the year. 

Such a rapid fall in price growth allows for greater optimism that disinflation is finally under way and also over “the possibility that further ECB base rate increases may not, finally, be required to a level that could trigger a harsh landing of the eurozone economy to tame inflation.” 

The ECB has hiked rates by a combined 300 basis points to 2.5% since July and promised a 50-bp increase in March. [Reuters]