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ECB's Holzmann says warming to June rate cut

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The European Central Bank could start cutting interest rates in June as inflation may fall quicker than expected but should not get too far ahead of its US counterpart, as that diminishes the potency of easing, Austrian policymaker Robert Holzmann said.

Euro area inflation has tumbled over the past year and economic growth stalled, shifting the debate to just how quickly and how far the ECB should move in reversing a record string of rate hikes.

Holzmann is considered by some to be the single most conservative member of the ECB's 26-member Governing Council, often batting back rate-cut talk, so his cautious nod to a June easing suggests a growing consensus for a move already raised by several others. Holzmann, who has already said he would not seek a new term when his mandate expires in August 2025, argued that with inflation at 2% and productivity expanding by 1%, a 3% deposit rate could be a"good target".

Markets see the deposit rate coming down to 2% over the longer term, but policymakers have so far steered clear of discussing the issue of where the easing could end.

Source: Loan Digest (loandigest.net)

 

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