The European Central Bank may discuss an interest rate cut in June, the bank’s vice-president, Luis de Guindos, said on Tuesday, joining the long list of officials calling for the June 6 meeting as a possible rallying point for the start of the monetary easing.
ECB President Christine Lagarde said this month that the bank was just starting to discuss the possibility of cutting interest rates because of falling inflation.
However, investors are a bit skeptical and a cut is only fully priced in for July, as concerns grow that the Federal Reserve may delay its initial decision and the ECB is reluctant to act alone.
“We have not yet discussed anything about future rate changes,” de Guindos said in an interview with Greek newspaper Naftemporiki. “We need to gather more information. In June we will also have our new projections and we will be ready to discuss this too.”
Among the 26 members of the Governing Council, the central bank presidents of Spain, the Netherlands, Ireland, Greece and Slovakia publicly supported the June decision, while the ECB’s chief economist, Philip Lane, supported it in June. June, second quarter, claiming that the ECB will have “a lot more” information by June.
De Guindos said the biggest risk to this timeline is the combination of rapid wage growth and low productivity.
“These two factors together can lead to a significant increase in unit labor costs,” he said. “And this is a risk, especially for services inflation, because services require a lot of labor and are protected from foreign competition.”
Source: Terra
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