ECB Official Emphasizes Importance of Incoming Economic Data Over Neutral Rate
Frank Elderson, Executive Board member of the European Central Bank (ECB), has highlighted the significance of incoming economic data in monetary policy decisions, rather than focusing solely on the neutral rate of interest.
Echoing the sentiments of other ECB officials, Elderson described the neutral rate, a theoretical level considered neither stimulative nor restrictive, as having limited practicality in guiding short-term policy actions.
"It's an important concept for understanding the likely long-run average interest rate," Elderson said at an MNI-organized event. "But given the elevated global volatility, I believe our time is better spent understanding how these shocks will affect inflation, rather than pinpointing the exact location of the natural rate."
Elderson further emphasized the ECB's commitment to price stability and expressed confidence in convergence toward the inflation target. He also reiterated the ECB's view that conditions for economic growth remain favorable for 2025.
Elderson also noted that a tighter monetary policy stance in the United States is likely to have a disinflationary impact on the eurozone in the medium term.