ECB Policy Debate: Diverging Views on Growth Amid Inflation Concerns

European Central Bank policymakers are divided on the economic outlook, with some fearing recession while others focus on inflation pressures. The debate could influence rate cuts over the coming months. Although there's consensus to cut rates in September, future decisions will likely be more complex as economic conditions evolve.

European Central Bank policymakers are increasingly divided over the outlook for economic growth, with some fearing a recession while others focus on inflation pressures, sources close to the matter disclose.

The ECB cut interest rates in June and is expected to ease them again in September. However, future policy decisions are likely to be more complicated as the euro zone economy faces uncertain conditions, according to conversations with nearly a dozen insiders. The central debate revolves around how a potential recession would impact inflation, the bank's primary focus, as it aims to hit a 2% inflation target by the end of 2025.

While much of the discussion remains private, sources reveal diverging viewpoints. ECB spokesperson declined to comment. Policy doves argue that the economy is weaker than anticipated and recession risks are growing, while conservatives maintain that growth figures are stronger than survey results suggest. ECB board member Isabel Schnabel emphasized that inflation control should remain the primary concern.

(With inputs from agencies.)