Two key European Central Bank figures on Monday spoke in favor of the prospect of an interest rate cut next week, suggesting that the deal is, in fact, done.
In a speech on Monday, Olli Rehn, ECB governing council member and head of Finland’s central bank, emphasized that inflation in the euro zone is falling “sustainably.”
Inflation in the euro area remained stable at 2.4% in Aprilmarking the seventh consecutive month it has been below 3%, albeit slightly recoil in December. Figures for May will be published on Friday.
“Thanks to this deflationary process, inflation is moving towards our 2% target and therefore the time is ripe in June to ease the monetary policy stance and start cutting interest rates, ” Rehn said in a speech published on the website of the central bank of Finland.
“This clearly assumes that the deflationary trend will continue and that there will be no further headwinds in terms of geopolitics and energy prices.”
Meanwhile, ECB Chief Economist Philip Lane said in a report. Interview with the Financial Times“Barring major surprises, at this point what we’re seeing is enough to remove the highest level of restrictions.”
The comments come ahead of the central bank’s next meeting on June 6. Markets are now showing a strong possibility of a quarter-point cut to the ECB’s key interest rate, from the current level of 4%.
Rehn and Lane’s comments on Monday follow one countless similar emotions from other ECB members.
It indicates that the European Central Bank is likely to act sooner than the US Federal Reserve, which typically takes the lead in monetary policy decisions.
“The Fed and ECB look set to decouple, with the ECB likely to cut interest rates in June while preparing to maintain sustained highs in the US,” said Bank of America economists led by Claudio Irigoyen. ”.
The debate over when the Fed might start cutting interest rates is raging in the US. Last week, several strong economic and labor data releases saw Goldman Sachs boost its forecast for interest rates. Fed rates. cut from September to July.
Meanwhile, minutes of the Fed’s April 30-May 1 policy meeting points to uncertainty among policymakers about the right time to ease.
Bank of America’s Irigoyen said “Fedspeak” and recent minutes suggest a rate cut in the US is now no longer feasible.
“We think the rate cut cycles of the ECB and the Fed will be very different,” he concluded.
– CNBC’s Jenni Reid and Brian Evans contributed to this report.
