European Central Bank (ECB) vice president Luis de Guindos has recently emphasized the possibility of an interest rate cut in June while acknowledging the uncertainties surrounding future policy decisions. Despite reinforcing guidance on a potential rate cut, de Guindos highlighted the challenges posed by various economic factors.
Despite concerns such as rising oil prices and a weaker euro, the ECB has maintained its position on a potential interest rate adjustment, signaling its readiness to adapt its monetary policy stance if current trends persist.
The ECB vice president reiterated the central bank’s recent guidance regarding inflation, indicating that while inflation stood at 2.4 percent in March, the ECB expects it to remain near this level in the coming months before easing back to the 2 percent target next year. However, de Guindos declined to speculate on future rate movements, citing the complexities involved in considering various economic factors and risks.
Markets now expect a 75 basis points cut in the central bank’s 4 percent deposit rate this year or two rate cuts after June. Moreover, some policymakers hinted at a possible second cut in July.
Read: U.S. economic activity expands slightly in April, inflation expectations remain firm: Survey
De Guindos highlighted the challenges faced by policymakers in assessing the evolving economic landscape, citing factors such as wages, productivity, unit labor costs, profit margins, and geopolitical risks. These considerations add complexity to the formulation of monetary policy decisions, underscoring the need for a cautious approach.
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