ECB Director Schnabel halts the hike in interest rates
Changes are inevitable, but the future remains uncertain. The European Central Bank's (ECB) decision to lower interest rates in June is imminent, yet the unknown lies in what comes next. ECB Director Isabel Schnabel raises concerns about rapid expectations for additional rate cuts.
Key figures at the ECB have effectively signaled a forthcoming decline in rates come June. But where do we go from there? Schnabel hinted in an interview with "Nikkei" that post-June rate reductions might not be justified, at least not immediately. "The final push in the decline of inflation is arguably the most challenging," she expressed, fearing that premature easing of monetary policy may be a risk. "We must tread with utmost caution," remarked the ECB's six-member leadership team's member.
In the summer of 2022, the ECB persisted in its long-held no-interest-rate policy in an attempt to restrain inflation. Within a short span, they hauled the key interest rate up to 4.5 percent that banks borrow fresh cash from the central bank.
Moving forward, April 2023 saw eurozone inflation at 2.4%, inching closer to the ECB's medium-term goal of a two-percent annual inflation rate. Once reaching this threshold, price balance is seen as secure, according to monetary officials.
To further solidify confidence in inflation finally hitting the ECB's target of 2% by 2025 at best, more progress is required. Geopolitical occurrences, like the intensified turmoil in the Middle East, may pose potential upside risks to the inflation projection.
It's common knowledge that the ECB meeting on June 6 will likely witness a rate reduction. But with this move expected by various monetary decision-makers, the upcoming debate centers on the future path of interest rates. The markets anticipate the ECB to slice rates by three times in 2023.
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The ECB Director Isabel Schnabel's remarks suggest a potential interest rate turnaround, as she expresses concerns about justifying further rate cuts after June's anticipated decrease. The European Central Bank's (ECB) interest rate policy will undoubtedly be a topic of debate following the expected rate reduction at the ECB meeting on June 6.
Source: www.ntv.de
