Mario Centeno, a member of the European Central Bank's Governing Council, stated that if some of the risks facing the region's economy materialize, a larger rate cut could be discussed.
The Portuguese central bank governor said on Friday that he prefers to take a "gradual" approach, defining it as stable and predictable steps. However, with risks such as U.S. trade tariffs looming, it might be necessary to take more aggressive actions than the typical 25 basis point cuts seen so far.
"If data confirms that the downward growth risks materialize, and this month's inflation data follow the same trend, we can certainly discuss and be open to different paces," he said.
"But more importantly, it is to send the message that we are fulfilling our duties, adjusting interest rates in the right direction, and we will continue to do so as long as the data requires," he said.
The next European Central Bank rate-setting meeting is less than three weeks away. Despite a possible acceleration in inflation this month, bets on a 50 basis point rate cut have been increasing after Friday's data showed an unexpected contraction in euro zone business activity.
Centeno stated that officials must focus on preventing inflation from falling below the target level, similar to the years before the pandemic. He estimates that the neutral interest rate level, which neither stimulates nor restricts the economy, is at 2% or lower.
"The way forward will be to lower interest rate levels," Centeno said. To avoid inflation falling below 2%, "we need a stronger economy."