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27/05/24
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Policymakers Say ECB Should Take Its Time to Cut Rates
On Monday, key European Central Bank policymakers said although the central bank has room to cut interest rates as inflation eases, it should take its time even if the direction of inflation is clear.
As the ECB has just about promised to cut rates on June 6, the debate has now moved to subsequent cuts and the speed at which they will be made. Markets have trimmed their expectations to bet on only one more cut this year.
Francois Villeroy de Galhau, the French central bank chief told Germany’s Boersen Zeitung that, the first rate cut in June was a done deal barring any surprises. He added that thereafter they could move one of several ways.
He didn’t call for a fast follow-up but chided board colleagues who were already discussing a pause after the first step.
Villeroy said they should go data-driven and meeting by meeting to keep their options open on the pace and timing.
Philip Lane, the ECB’s chief economist’s stance was more measured, and he warned that cutting too late may push inflation to lower than target, which would then push the ECB to rush future rate cuts.
In a speech in Dublin, Lane said keeping rates too restrictive now may push inflation below target.
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