ECB should consider mildly supportive stance as on low growth, inflation, Wunsch says
The ECB has cut rates by two full percentage points since last June, and its 2% deposit rate provides a so-called "neutral" setting, which neither slows nor stimulates economic growth.
However, the growth outlook was muted and inflation could be pulled down by a host of factors, suggesting that neutral may not be enough, Wunsch argued.
"There is an argument for providing a mildly supportive policy stance," Wunsch told Reuters in an interview. "If the recovery is delayed — and it has been delayed a few times — and output is below potential, then being supportive is rational."
He added that the euro's surge to 1.18 against the dollar, its highest level since late 2021, was also an argument to provide this support, since the stronger currency would dampen inflation and could also weigh on economic growth.
Cheap imports from China, lower energy prices, the lack of tariff retaliation, the strong euro and a substantial slowdown in wage growth were all putting downward pressure on prices, Wunsch said, joining Portuguese policymaker Mario Centeno and Finland's Olli Rehn in warning about the risk of too-low inflation.
"All these factors combined suggest that the upside risk is limited and the overall risk is to the downside," Wunsch said.
ECB projections see inflation below 2% for 18 months from the third quarter, before a return to target in early 2027.
Financial markets anticipate one more rate cut from the ECB later this year, taking the deposit rate to 1.75%, a stance some already consider to be mildly stimulating.
"I don't disagree with market pricing for interest rates," Wunsch said. "I won't endorse expectations but I am also not uncomfortable with them either."
But Wunsch also appeared to play down worries that ECB rates would have to go too deep, arguing that the economy was holding up well.
"I am not overly concerned about growth," Wunsch said. "Recent national PMI numbers were rather comforting. German fiscal plans are also game changing. Major fiscal expansion by a country that can afford it, provides a major boost."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The National
2 hours ago
- The National
Real Madrid salaries 2025/26: Kylian Mbappe, Vinicius Jr and Jude Bellingham among top earners
Xabi Alonso has called for reinforcements as Real Madrid look to turn the page on a disappointing end to the Carlo Ancelotti era. Ancelotti's Madrid were dismantled regularly by rivals Barcelona last season, who won all four meetings between the sides as well as winning La Liga, Copa del Rey and Spanish Super Cup crowns. Italian coach Ancelotti left for the Brazil national team job and was replaced by former Madrid midfielder Alonso, who must now revive a squad packed with household names. As well as star players like Kylian Mbappe and Vinicius Jr, Alonso has new weapons at his disposal. Over €170 million was spent this summer to sign full-back Trent Alexander-Arnold from Liverpool and 20-year-old Netherlands-born Spain centre-back Dean Huijsen, who arrived from Bournemouth. The club also signed Spanish left-back Alvaro Carrera from Benfica, bolstering their defensive options following a trophyless campaign in 2024/25. The new Madrid manager must also address other issues, including getting the best out of Mbappe and Vinicius given they are still yet to reach their top level in the same side. Although French star Mbappe struck 43 goals under Ancelotti, it was not enough to inspire a Madrid side that finished the season without a major trophy. Mbappe's illness with a stomach bug also kept him out of Madrid's group matches at the Club World Cup. Madrid also go into the new season without Luka Modric in the squad for the first time in over a decade. Dani Carvajal's return from a long-term knee injury is another piece of good news for Madrid. Below is the wage bill of Real Madrid for the new season, compiled from reports, and Real Madrid salaries 2025/26 1. Kylian Mbappe – €600,000 per week 2. David Alaba – €430,000 per week =3. Vinicius Junior – €400,000 per week =3. Jude Bellingham – €400,000 per week =5. Federico Valverde – €320,000 per week =5. Trent Alexander-Arnold – €320,000 per week 7. Thibaut Courtois – €290,000 per week =8. Eder Militao – €280,000 per week =8. Antonio Rudiger – €280,000 per week =10. Rodrygo – €240,000 per week =10. Aurelien Tchouameni – €240,000 per week =10. Eduardo Camavinga – €240,000 per week =13. Dani Ceballos – €200,000 per week =13. Ferland Mendy – €200,000 per week =13. Dani Carvajal – €200,000 per week =16. Alvaro Carreras – €173,000 per week =16. Dean Huijsen – €173,000 per week 18. Brahim Diaz – €140,000 per week 19. Raul Asencio – €120,000 per week 20. Arda Guler – €100,000 per week 21. Fran Garcia – €80,000 per week 22. Endrick – €70,000 per week 23. Andriy Lunin – €67,000 per week
Arabian Business
11 hours ago
- Arabian Business
Jazeera Airways offers 'buy 1 get 1 free' flights across its network
Jazeera Airways has announced a new 'Buy 1 Get 1 Free' promotion, making travel more affordable across its entire network. From August 18–24, 2025, customers who book a one-way or round-trip ticket on the airline's website or mobile app will receive a second ticket free of charge. The offer applies to journeys taken between September 1 and December 15, 2025, with no limit on the number of tickets that can be booked. Jazeera Airways flight sale The promotion opens up the chance to explore destinations across Europe, the Middle East, and Asia. Travelers can stroll the streets of Budapest and Prague, experience the souks of Istanbul, visit Tashkent's historic landmarks, or relax on the beaches of Sharm El Sheikh and Colombo. Other destinations include Salalah's waterfalls and the mountains of Abha. Paul Carroll, Chief Commercial Officer at Jazeera Airways, said: 'At Jazeera Airways, we believe that incredible travel experiences should be accessible to everyone. Our Buy 1 Get 1 Free offer isn't just a deal—it's a way to unlock new destinations and make travel more affordable. 'Now, you can explore a new city or revisit a favourite place with a friend or family member, all while getting double the value for your money.' The promotion applies to Jazeera Airways' popular Light fare, offering travellers value with the option to add extras such as checked baggage, in-flight meals, preferred seating, and packages at 60 per cent off. To redeem the deal, customers must enter the promo code J9B1G1 when booking on the Jazeera Airways website or mobile app.
Zawya
13 hours ago
- Zawya
UAE ranks 16th globally in ‘Government Support Index' in IMD World Competitiveness Yearbook 2025
The United Arab Emirates has achieved another landmark milestone in its record of global leadership, advancing to 16th place worldwide in the 2025 Government Support Index, one of the key indicators featured in the International Institute for Management Development's (IMD) World Competitiveness Yearbook. This marks a remarkable jump of 27 positions from its 43rd place in 2024. The Government Support Index measures the value of government support as a percentage of gross domestic product (GDP) and serves as a benchmark for the efficiency of public financial resource management, as well as a country's ability to stimulate economic growth through well-targeted and effective public spending policies. The Ministry of Finance affirmed that the UAE's rise to 16th place globally reflects the efficiency of the nation's fiscal policies and the concerted efforts to enhance the effectiveness of public expenditure. This progress has been achieved through an integrated framework of collaboration between the federal government and local financial departments to advance financial analysis tools and optimise resource allocation. The Ministry further noted that it is continuing to strengthen the country's standing in the Government Support Index by improving the quality of financial data and promoting sustainability and fiscal balance practices, in line with the UAE's vision to enhance global competitiveness and achieve the Sustainable Development Goals, in close coordination with local finance departments. The Ministry explained that this achievement demonstrates the increasing trust of international institutions in the UAE's public financial governance framework. It underscores the country's commitment to sustainability across sectors through the development of precise statistical financial reports that accurately reflect the scale and scope of government support, thereby enabling sound, evidence-based fiscal decision-making. The Ministry stressed that it attaches great importance to strengthening fiscal transparency and developing the statistical data infrastructure, highlighting that enhancing data reliability and improving the level of financial disclosure are fundamental pillars in shaping public policy. These efforts reflect the UAE's adherence to the highest standards of financial governance, supporting economic stability and boosting its capacity to respond to global developments with agility and efficiency. The Ministry concluded, 'We aspire to rank among the world's top ten in the Government Support Index by 2026, guided by the vision of our wise leadership and the dedication of our national teams. We will continue to embed a results-driven approach based on effective public spending and financial sustainability to drive the nation's growth.' According to the IMD World Competitiveness Yearbook 2025, the United Arab Emirates ranked among the world's top ten countries in several competitiveness indicators, reflecting the nation's advanced financial performance. The UAE secured first place globally in both venture capital and collected personal income tax as a percentage of GDP. It ranked second in corporate profit tax rate, third in government budget surplus/deficit (US$ billion), and fourth in both decline in collected indirect tax revenues and decline in consumption tax rate. The country also placed fifth in taxes collected on capital and property, sixth in public finance, seventh globally and first regionally in general government expenditure as a percentage of GDP, and ninth globally in real growth of government consumption expenditure. These achievements underscore the UAE's global competitiveness, reaffirm its commitment to fostering a sustainable economic environment, and highlight its ability to adapt to challenges and respond to global economic shifts—further strengthening its position as a leading global economic hub. As part of its national strategy, the Ministry of Finance is working to develop and enhance financial data collection tools through advanced institutional information systems, while strengthening coordination between the federal government and local finance departments. These initiatives aim to improve financial performance indicators and deliver tangible impact on the quality and developmental role of public spending.
