ECB Interview with Piero Cipollone

FRANKFURT (Reuters) – Below is a transcript of the Reuters interview with ECB board member Piero Cipollone.

Q: Monetary Policy Guidance

A: The direction for inflation is clear; convergence with the target is expected by 2025, aligning with decreasing interest rates contingent on incoming data.

Q: Market Expectations for Rate Cuts

A: I’m comfortable with ongoing market expectations for rate cuts, provided it leads us sustainably toward our inflation target.

Q: Impact of Trade Tensions

A: Trade war implications depend on specifics. Immediate effects may hurt growth, but European companies have historically adjusted to defend market share. A trade war with China poses a bigger threat due to their manufacturing capacity.

Q: Possible Rate Cut in March

A: High uncertainty makes predictions difficult. There’s room for a downward adjustment in rates, but a careful, data-dependent approach is essential.

Q: Neutral Rate Estimates

A: Neutral rate estimates are broad and offer little guidance under current uncertainty, influencing monetary policy decisions differently.

Q: Moving Past Restrictive Policies

A: As we approach targets, we may need less restrictiveness. However, since growth expectations are down, we reassess our restrictive stance cautiously.

Q: Accommodative Measures

A: Current inflation risks are balanced, though energy cost increases warrant prudence. There’s no evidence of an inflation undershoot.

Q: Economic Growth and Investments

A: Weakness in investments stems from uncertainty, not solely monetary policy; firms are delaying major decisions amid unclear trade policies.

Q: ECB’s Role Regarding Investments

A: We aim to foster growth without imposing undue restrictions, while reducing uncertainty where possible.

Q: Conditional Payments in Digital Euro

A: We’re exploring conditional payment models using digital euros, independent of blockchain tech, but focusing on improving payment quality.

Q: Digital Euro Legislation

A: Progress is being made on digital euro legislation, hindered by election timing but regaining momentum in the EU framework.

Q: Response to Stablecoins

A: Stablecoins could shift deposits to the US, posing competition as payment methods evolve; thus, a digital euro is necessary.

Q: Central Banks and Bitcoin

A: Currently not a concern for major banks; bitcoin lacks underlying value, making it a questionable investment compared to gold.

Conclusion

A: Central bank currency is vital for transactions; alternatives like bitcoin cannot replace its utility and stability.