Yannis Stournaras, a member of the ECB Governing Council, stated that the central bank is not planning further rate cuts at this time. Major changes in inflation or growth would be necessary for any easing, based on his recent comments. Stournaras, who is also the Governor of the Bank of Greece, mentioned that inflation is expected to stay below 2% for several years. He explained that this scenario alone does not warrant any rate reductions, calling the current policy a “good equilibrium.”

Current Policy Stance

In their recent meetings, the ECB chose to keep borrowing costs steady. They believe that price pressures and risks are manageable. If this view changes, they would adjust their policies accordingly. While there are ongoing risks from tariffs and geopolitical issues, these aren’t considered serious enough to justify further cuts. The ECB predicts an inflation rate of 1.7% for next year, increasing to 1.9% by 2027. By 2028, inflation should approach, but stay below, 2%. Stournaras pointed out that an additional minor rate cut would mainly be symbolic, lacking a significant impact on the market. A stronger euro does not seem likely to change the current policy, indicating that the ECB is committed to its approach unless there is a major economic shift. With the belief that we are nearing the end of interest rate cuts, expectations for more easing should be reduced. The recent flash inflation figure of 1.8% for August 2025 supports this steady policy outlook. Traders may want to reconsider positions that were betting on lower borrowing costs in the Eurozone for the rest of the year.

Impact on Markets

This stable policy boosts support for the euro, especially since the cycle of rate cuts seen through mid-2024 is likely over. Options strategies that take advantage of a stronger or steady euro against currencies with uncertain central bank policies might be beneficial. The euro’s recent strength, staying above 1.09 against the U.S. dollar, reflects this lower chance of further cuts. For equity markets, the lack of additional monetary stimulus suggests limited short-term gains. With Eurozone GDP growth for Q2 2025 at a modest 0.4%, the economic environment does not support aggressive upside bets. Strategies like buying put options on the EURO STOXX 50 index could be a smart way to protect portfolios from risks associated with geopolitical uncertainty. The central bank’s “wait and see” approach is likely to reduce market volatility in the upcoming weeks. This creates a setting where selling options could be profitable, provided there are no major economic surprises. The VSTOXX index, which measures European equity volatility, has already dropped over 15% in the last quarter, indicating that the market is accepting this stable policy period. Create your live VT Markets account and start trading now.

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