Wen Shi: The European Central Bank has reason to adopt a moderate supportive policy stance.

Jin10 data, July 2, reported that ECB Governing Council member Wunsch stated that inflation in the Eurozone faces risks below the Central Bank’s target, and the ECB has reason to adopt a mild supportive policy stance. Since June last year, the ECB has cut the interest rate by a full two percentage points, and its 2% deposit rate provides a so-called “neutral” environment that neither slows down nor stimulates economic growth. However, Wunsch believes that the economic growth outlook is bleak, and inflation may be lowered by a series of factors, indicating that the neutral stance may not be sufficient. “There are views that a mild supportive policy stance should be adopted,” Wunsch said. “If the recovery is delayed - which has already been delayed several times - and output is below potential levels, then supportive policies are reasonable.” He added that the EUR/USD exchange rate soared to 1.18, the highest level since the end of 2021, which is also a reason to adopt a supportive policy stance, as a stronger euro will suppress inflation and may also drag down economic growth.