ECB’S rate cut decision to come soon

Frankfurt, Germany – The European Central Bank (ECB) will soon start lowering borrowing costs, according to Governing Council member Martins Kazaks.

If the economy “roughly follows” the ECB’S forecasts, “then the decision to start reducing interest rates could be made within the next few meetings,” the Latvian central banker said in a blog post on Wednesday.

“Although we did not talk about the reduction of interest rates in the ECB Council at the March meeting, we started a discussion about a possible reduction of rates in the future,” he revealed.

Kazaks continued, “Until recently, the risk of reducing interest rates too quickly and driving inflation rates up again, which would require rate hikes well above the current 4 percent to curb inflation (we remember the painful experience of the late 1970s and early 1980s in Europe and the USA!), was much higher about the risks of starting to reduce rates too late.”

“These risks are now beginning to level out and there is no need to delay the rate reduction too much,” he noted.

Another ECB Governing Council member Pierre Wunsch reiterated that policymakers will eventually have to lower borrowing costs without being completely sure that inflation is returning to the 2% target.

At some point, “we’ll have just to say, okay, we believe it’s going to work and we’re going to take a decision and I don’t think it’s going to be, you know, before so long,” the Belgian central bank chief said, as reported by Bloomberg.

Officials are leaning heavily toward June for an initial reduction in the deposit rate from its current record high of 4%, though a minority hasn’t shut the door on beginning at the preceding policy meeting, in April.