ECB firmly behind June interest rate cut

FRANKFURT: European Central Bank policymakers continued to line up behind a June interest rate cut on Wednesday despite rising oil prices and a weaker euro, but they diverged on the path for monetary policy beyond the initial move.

The ECB has flagged a rate cut for June 6, but policymakers have largely avoided discussing what happens later on, partly on uncertainty over prices and partly due to risks that the US Federal Reserve, which sets the tone for the world economy, could delay its own rate cuts.

Bundesbank chief Joachim Nagel fully backed the June move but ECB board member Piero Cipollone also appeared to entertain another move later on.

“If we see that the incoming data, and we’ll receive many data in July and June... will confirm our confidence that inflation is really (moving) to target, it will be appropriate to remove some of the restriction that we put in place,” Cipollone told the IIF forum in Washington.

Greek central bank chief Yannis Stournaras and Lithuania’s Gediminas Simkus have both suggested that July could be in play while others, including ECB Chief Christine Lagarde, have pushed back on any talk beyond the June 6 meeting. Nagel was also cautious.

“If prices and the economy develop as expected, I would support a cut in key interest rates in June,” he told German newspaper Wirtschatswoche.

“However, the latest data from the US reminds us that the return of inflation to the target is not a surefire success. It is therefore right that the ECB Council has not commited itself to a rate cut in June.”