European Central Bank Executive Board member Schnabel: Eurozone can continue to cut interest rates, but caution is needed.

European Central Bank Executive Board Member Isabel Schnabel expressed that as the inflation rate approaches 2%, the ECB may have room to further lower borrowing costs, but must proceed with caution. In an interview, she stated, "We currently believe that there are no major risks that could prevent us from achieving our 2% target. If that is the case, we may lower interest rates further." However, she also emphasized, "After the significant rate cuts of the past few months, we are increasingly approaching a moment where we must carefully consider whether we can still cut rates, and by how much." The ECB is expected to reduce rates by 25 basis points for the fourth time in 2024 at an upcoming meeting less than two weeks away. With inflation expected to continue reaching 2% this year, officials' focus is shifting to the struggling economy. Economists and investors anticipate that by 2025, the ECB will have cut rates by 100 basis points, bringing the deposit rate down from 3% to 2%. However, uncertainty surrounding the eurozone economic growth and inflation outlook is increasing, especially with the trade risks brought by Trump's return to the White House on Monday. Schnabel stated that the new US administration is "very likely" to provoke trade conflicts, which could have potential negative impacts on European economic activity and prices, especially if the EU retaliates, leading to higher import prices. Schnabel pointed out that there is very little information about Trump's plans currently, leading to a high level of uncertainty that is dampening private consumption and investment. She said that this is "poison" for the economy. However, Schnabel noted, "We are on the right track and expect to return to the 2% inflation target this year. The extremely high inflation of the past few years has been very difficult for many people. It took us quite a long time to react." Regarding the issue of the German elections, Schnabel believes that the new government after the early elections on February 23 will face three major challenges: overcoming the country's structural crisis, dealing with the green transformation, and addressing the shortage of skilled workers.