ECB Official Expresses Optimism About Possible Interest Rate Decrease in June.
During recent months, the key interest rate has remained at 4.5 percent as set in September. The European Central Bank (ECB) had been hesitant to announce any changes, but Director Isabel Schnabel hinted that this might soon change. Schnabel believes a first interest rate cut is likely to occur next month.
Schnabel's statement was made on a TV show called "mex. das marktmagazin" airing on Hessischer Rundfunk (hr). She stated that if inflation forecasts and fresh data align with their prior views, then an interest rate decrease would happen in June. "We're witnessing a slight improvement in the eurozone's economy, while inflation is still falling," she added.
This potential move could help the European Central Bank return to price stability without causing a recession. Their target is to maintain an inflation rate of 2.0 percent for the 20-country community. While April's 2.4 percent rate was close to this target, experts already expected a cut during the June 6th monetary policymakers' conference.
The deposit rate, which serves as the key interest rate on the financial market, has been at 4.00% since September 2023, reaching its highest level since the monetary union's establishment in 1999. Schnabel noted that this imminent interest rate flip has already affected lending rates. "If the interest rate cut is carried out as anticipated, it won't change anything since it's already factored into the current interest rates," she explained.
Key market players anticipate up to three interest rate reductions from the ECB by the end of the year. Schnabel warned, "We must exercise caution and monitor the data closely to identify any signs of unexpected changes in inflation." She also pointed out that the risk of wage-price spirals is significantly lower than in the 1970s. "Wages are rapidly growing, but they're gradually slowing down now," Schnabel shared in the ARD show "Plusminus".
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Source: www.ntv.de
