Yannis Stournaras, a member of the ECB Governing Council, indicated that the central bank is currently holding off on further rate cuts. Only a major change in inflation or growth conditions might lead to further easing, according to his recent statements.
Stournaras, who also serves as the Governor of the Bank of Greece, noted that inflation is expected to stay under 2% for years. He clarified that this alone does not justify additional rate reductions, describing the current policy stance as “a good equilibrium.”
Current Policy Stance
In recent meetings, the ECB decided to maintain borrowing costs. Price pressures and risks are considered manageable, and any change in this assessment would prompt policy adjustments.
Risks from tariffs and geopolitical uncertainties persist, but they are not deemed severe enough for further cuts. The ECB’s forecasts suggest inflation at 1.7% next year, rising to 1.9% by 2027. By 2028, inflation is projected to approach but remain below 2%.
Stournaras mentioned that another small rate cut would be mainly symbolic and would not substantially impact the market. A stronger euro is not seen as a factor that would alter policy, suggesting the ECB’s commitment to its current approach unless there is a significant economic shift.
Given the view that we are likely done with interest rate cuts, expectations for further easing should be scaled back. The recent August 2025 flash inflation print coming in at 1.8% reinforces this steady policy outlook. Traders should consider unwinding positions that were betting on lower borrowing costs in the Eurozone for the remainder of the year.
Impact on Markets
This policy stability lends support to the euro, especially as the rate cut cycle we saw through mid-2024 now appears to be firmly in the past. Options strategies that benefit from a stronger or range-bound euro against currencies with more uncertain central bank policies could be favorable. The euro’s recent strength, holding above 1.09 against the U.S. dollar, reflects this reduced likelihood of further cuts.
For equity markets, the absence of further monetary stimulus suggests a cap on near-term gains. With Eurozone Q2 2025 GDP growth confirmed at a modest 0.4%, the economic backdrop does not justify aggressive upside bets. Hedging strategies, such as buying put options on the EURO STOXX 50 index, may be a prudent way to protect portfolios against downside risks from geopolitical uncertainty.
The central bank’s “wait and see” approach is likely to dampen market volatility in the coming weeks. This creates an environment where selling options premium could be profitable, assuming no significant economic data surprises. The VSTOXX index, a measure of European equity volatility, has already declined by over 15% in the last quarter, signaling market acceptance of this stable policy period.
