ECB signals it could cut rates in June
The European Central Bank signalled Thursday it could cut interest rates at its next meeting in June, a big step as the rich world’s central banks, including the US Federal Reserve, wrestle with how soon declining inflation will let them lower credit costs for business and consumers.
The bank left its key rate benchmarks unchanged at a record high of 4%, but bank president Christine Lagarde said a rate cut was now on the table.
If incoming data confirm inflation’s decline, “it would be appropriate to reduce the current level of monetary policy restriction,” she said at her post-decision news conference.
The policy meeting at the bank’s skyscraper headquarters in Frankfurt was widely regarded as a prelude to the 6 June meeting, after Lagarde had dropped a broad hint by saying that the bank would have more information on the path of inflation at that meeting.
Thursday’s stance “officially opens the door to a June rate cut,” said Carsten Brzeski, chief of global macro at ING bank. “This is the first time the ECB has talked about rate cuts in its official policy announcement.”
The decision comes as the rich world’s central banks are tilting toward undoing some of the sharp hikes to interest rates that were imposed with the goal of getting inflation under control.
The Swiss National Bank was the first major central bank to cut rates in the current cycle on 21 March.
The big exception is Japan, which raised rates for the first time in 17 years on 19 March.
It’s a policy shift closely watched by stock investors. Markets soared in recent months on expectations of lower rates by this
The Swiss National Bank was the first major central bank to cut rates in the current cycle on 21 March
summer.
Broad stock market indexes fell immediately in the US on Wednesday and bond prices rose after a hotter than expected inflation reading of 3.5% for March raised fears that the Fed may wait longer than previously thought to lower its benchmark interest rate.