ECB Economist Signals Stronger Case for June Rate Cut

ECB Rate Cut: European Central Bank (ECB), Chief Economist Philip Lane emphasised growing momentum behind a potential interest rate cut slated for June. Speaking to Spanish newspaper El Confidencial, Lane highlighted easing trend in services inflation, bolstering case for monetary stimulus.

ECB's intentions have been clear: a rate cut on June 6 is all but assured, contingent upon incoming data reinforcing policymakers' confidence in inflation returning to 2 per cent target by mid-next year. Lane expressed increased optimism, citing April flash estimate for euro area inflation and Q1 GDP figures as positive indicators. However, he acknowledged significance of forthcoming crucial data releases in shaping ECB's decision-making.

Market sentiment aligns with Lane's outlook, with investors largely anticipating a June rate cut. Yet, uncertainties loom regarding future policy actions, especially after U.S. Federal Reserve hinted at potential delays in its own easing measures.

Lane underscored ECB's independence from Fed's decisions but acknowledged impact of a widening interest rate gap between major central banks. Such a scenario could weaken euro and bolster European inflation, potentially constraining ECB's room for unilateral action.

April's inflation data revealed a notable moderation in services prices, offering a glimmer of hope. Neverless, Lane emphasised ECB's continued vigilance, particularly regarding services, to prevent any derailment of disinflationary efforts.

Currently, overall inflation stands at 2.4 per cent, with ECB anticipating fluctuations around this level throughout year before a projected decline in 2025. se dynamics underscore ECB's cautious approach as it navigates complex landscape of economic recovery and price stability.

With Reuters Inputs