ECB signals ‘plausible’ June rate cut
The latest minutes from the European Central Bank (ECB) meeting indicated a rising chance for easing monetary policy in June. While a majority support maintaining current rates, a few members already advocated for immediate cuts in April, Euronews.com reported.
The monetary policy accounts of the latest European Central Bank's meeting in April indicated that the Governing Council finds it "plausible" to begin easing monetary policy restrictions in the upcoming June meeting.
As per the Euronews.com report, the April meeting minutes highlighted that markets had effectively digested the ECB'S communications, with a general preparedness for a potential rate cut in June, should incoming data support the current economic projections.
A broad consensus among the members underscored the prudence of waiting until the next monetary policy meeting. This would allow the Council to assess additional evidence and bolster confidence in a timely and sustained reversion of inflation to its target levels.
Voting patterns revealed a strong majority in favour of Chief Economist Philip Lane's recommendation to keep the three principal ECB interest rates unchanged. This majority expressed a growing confidence in economic forecasts, reinforcing their belief that the disinflationary trend was ongoing.
However, a minority of members were ready to endorse a rate reduction even at the current meeting, as the extent of policy tightening further increased due to the decline in the expected inflation.
They argued that the risks of not meeting the inflation target—potentially necessitating a steep corrective action later.
Despite this minority view, the prevailing sentiment within the Governing Council emphasised the merits of deferring any rate adjustments until June. This approach would allow for a more informed decision based on fresh evidence or any emerging risks, including those stemming from possible escalations in geopolitical tensions.
Recent communications from the ECB have solidified market expectations regarding the timing of the initial rate cut. Nonetheless, uncertainties about future policy directions remain significant.
ECB Vice-chair of the Supervisory Board, Frank Elderson, commented on Friday that a June rate reduction is likely, provided the economic outlook remains stable. He also noted the absence of any firm commitments regarding subsequent rate adjustments beyond June.