{"id":92459,"date":"2024-05-28T00:00:00","date_gmt":"2024-05-28T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/uae\/ecb-on-track-to-cut-interest-rates-next-week-top-bank-officials-suggest\/"},"modified":"2024-05-28T00:00:00","modified_gmt":"2024-05-28T00:00:00","slug":"ecb-on-track-to-cut-interest-rates-next-week-top-bank-officials-suggest","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/uae\/2024\/05\/28\/ecb-on-track-to-cut-interest-rates-next-week-top-bank-officials-suggest\/","title":{"rendered":"ECB on track to cut interest rates next week, top bank officials suggest"},"content":{"rendered":"

The European Central Bank could start cutting interest rates as early as its <\/strong>June 6 meeting<\/strong>, the bank\u2019s chief economist Philip Lane said in an interview<\/a> with the Financial Times. \u201cBarring major surprises, at this point in time there is enough in what we see to remove the top level of restriction,\u201d Lane said. A cut would make the ECB the first major central bank to loosen monetary policy after raising rites almost three years ago to tamp down inflation.<\/p>\n

AND- Finland\u2019s central bank governor is also suggesting the cut will come in June. <\/strong>Olli Rehn, who also sits on the ECB\u2019s governing council, said yesterday<\/a> that inflation is falling across the Eurozone \u201cin a sustained way,\u201d meaning \u201cthe time is thus ripe in June to ease the monetary policy stance and start cutting rates.\u201d He flagged geopolitics and oil prices as risks to that forecast. <\/p>\n

Don\u2019t expect the ECB to go nuts:<\/strong> While rate cuts are on the cards, interest rates will need to stay high enough to keep a lid on inflation, Lane suggested. \u201cThings will be bumpy and gradual. The best way to frame the debate this year is that we still need to be restrictive all year long,\u201d he said. <\/p>\n

The trigger:<\/strong> Eurozone inflation registered 2.4% in April<\/a>, down from a peak of over 10%<\/a> in October 2022, inching closer to the bank\u2019s 2% target<\/a>. Cooling inflation data have led investors to pencil in a 25 bps cut for the benchmark deposit rate at next week\u2019s meeting, the FT<\/a> reports.<\/p>\n

When can we expect rates to normalize? <\/strong>\u201cUnder the baseline forecasts, next year, when we expect wages to have visibly decelerated, when some of the base effects of fiscal measures which are pushing up inflation this year have faded out, then there will be a discussion about normalization,\u201d Lane said.<\/p>\n

Uh, Enterprise? What does that mean in plain English? <\/strong>Lane is suggesting the ECB is watching for two things on the inflation front before more aggressively cutting rates: For wages to grow at a slower pace<\/strong> next year \u2014 and for economies to fully adjust to the phase-out of energy subsidies and tax cuts<\/strong>. The subsidies and tax cuts were designed to shield consumers from high energy prices after Russia\u2019s invasion of Ukraine and to ease the bite of inflation. They were in place throughout 2023<\/a> and are being phased out in much of the Eurozone this year.<\/p>\n

Remember: <\/strong>The ECB held rates steady<\/a> at its last policy meeting in April, keeping the deposit rate at a record 4% that\u2019s been in place since September.<\/p>\n

ALSO WORTH NOTING THIS MORNING- <\/strong><\/p>\n