We are publishing the full text of the interview conducted on July 14, 2025 by Econostream with the Governor of the Bulgarian National Bank, Dimitar Radev, who will become a member of the Governing Council of the European Central Bank after Bulgaria joins the eurozone on January 1, 2026.
Mr. Radev, do you share the opinion that interest rates in the eurozone should not be reduced further?
I would not like to make predictions about future decisions of the Governing Council, especially before I officially take office. From the position of an outside observer, I can say that the ECB's current course looks balanced. The adjustment of June 2025 has been carefully calibrated, and any further steps should be strictly data-driven. Given the current inflation outlook, I agree that the threshold for further rate cuts should remain high.
In your opinion, how likely is it that euro area inflation will fall more permanently than expected?
Inflation forecasting remains challenging due to significant uncertainty. A temporary decline is possible, but underlying pressures – particularly on the wage and service price fronts – remain palpable. More broadly, the risk of persistently below-target inflation should be carefully assessed, taking into account the track record of stabilizing inflation expectations.
Do you think there is a risk that economic growth in the euro area could slow down further?
The possibility of weaker growth should not be underestimated, especially in the context of global uncertainty and rising geopolitical tensions. One of the key factors is fiscal policy. As the pandemic-era anti-crisis measures are gradually withdrawn, the priority should be to rebuild fiscal buffers in a growth-supportive manner. A lack of synchronisation with monetary policy or a delay in the necessary fiscal adjustments could weaken market confidence and increase the risk of a deterioration in the economic environment. The picture is further complicated by the need for higher defence spending, which, while necessary, could limit fiscal maneuverability. In this context, coordination between fiscal and monetary policies is crucial for macroeconomic stability.
Are you concerned about the recent appreciation of the euro and its possible impact on inflation?
The exchange rate is an important element in the monetary transmission mechanism, and its sharp change can have an impact on inflation. However, the ECB does not aim to achieve a specific exchange rate, and I fully support this principle. As long as the exchange rate dynamics are smooth and reflect fundamental economic factors, the impact on inflation should remain limited. Of course, these developments need to be monitored closely in view of our main objective – price stability.
Do you agree with Vice-President Luis de Guindos that a euro exchange rate above $1.20 would be problematic?
Vice-President de Guindos rightly stressed the importance of the exchange rate when it starts to affect inflation and financing conditions. I would not like to comment on specific levels, but I fully agree that significant or sharp fluctuations require increased attention. Ultimately, the important thing is that exchange rate dynamics are consistent with the ECB's mandate to maintain price stability.
Are we already out of restrictive monetary policy territory?
At this stage, especially from an outside observer's perspective, I would be cautious in making any definitive assessments. The June adjustment changed the policy setting, but whether we have already left the restrictive zone or are simply approaching neutral is a matter of ongoing assessment based on incoming data and inflation dynamics. What is important is that monetary policy remains consistent with the price stability mandate and is guided by a forward-looking, evidence-based framework.
What circumstances would justify a shift to accommodative monetary policy?
Such a shift presupposes strong and sustained evidence that inflation is steadily approaching its target and that the balance of risks has clearly shifted to the downside. Given the current uncertainty and the complexity of the transmission channels, any such change – if undertaken – needs to be carefully considered and based on a comprehensive analysis of the data. It is likely to be a gradual process.
Do you agree with my Governing Council colleagues that the inflationary impact of trade tariffs may have been underestimated in the latest projections?
From an outside observer’s perspective, I believe that the risks associated with protectionism and trade fragmentation are real and warrant attention. The impact of tariffs is not always immediate, but over time they can lead to higher production costs, supply chain disruptions and ultimately inflationary pressures. These are structural factors that need to be included in the medium-term risk analysis.
Do you think that a possible diversion of cheap Chinese goods to Europe could have an impact on euro area inflation?
For some product groups, a disinflationary effect from such a diversion may be observed, but for now the overall impact on euro area inflation remains limited. Whether this becomes a lasting trend will depend on a number of geopolitical and economic factors. I would rather put this question in the broader context of the impact of global supply chain restructuring on price stability.
You recently stated that you are leading one of the more conservative central banks and that you do not intend to change this position. What do you mean by “conservative“?
By “conservative“ I mean a policy based on stability, discipline and trust in institutions. This means consistency, resistance to short-term pressures and a firm commitment to the main objective - price stability. These principles are fully consistent with the ECB’s mandate and I will continue to be guided by them in my future role.
Are your views closer to the stricter position of Isabelle Schnabel or to the more moderate tone of Pierre Wunsch and Joachim Nagel?
In the Governing Council, I will work with all colleagues with respect and openness to different perspectives. My position is based on a tradition that emphasizes prudence, data-based decisions and a firm anti-inflation stance. I do not identify with specific labels – I am guided by the responsibility to implement the price stability mandate.
Given the still high inflation in Bulgaria, do you look forward to the start of monetary policy tightening?
Despite the relatively higher levels, inflation in Bulgaria remains within the price stability criteria. In addition, the country operates under a currency board arrangement, which means that monetary policy is effectively imported from the euro area. As a central bank, we further strengthen transmission through instruments such as the high minimum reserve requirement — currently 12%. Controlling inflation also requires consistent fiscal policy, structural reforms and strong institutions — areas where serious progress is needed. In view of our upcoming accession to the euro area, the focus is shifting from national to pan-European instruments, which will accordingly affect my role.
What are the most significant risks during the transition to the euro, especially with regard to price stability and inflation expectations?
Any transition of such a scale entails risks, especially with regard to public attitudes. If perceived price adjustments are not well managed, even temporary shocks can lead to undesirable effects on inflation expectations. That is why we have placed emphasis on transparency, timely communication and strong institutional coordination. Maintaining public trust and predictability throughout the transition is key.
Given the latest inflation data, are you confident that convergence will remain sustainable after the introduction of the euro?
Convergence is not a one-off act, but a continuous process that requires constant efforts. Bulgaria has made significant progress, but sustainability will depend on maintaining prudent fiscal policies, effective absorption of European funds and a competitive economic environment. I am convinced that with the right policies, convergence will remain sustainable after joining the euro area.