Luis de Guindos, Vice-President of the European Central Bank, said that there is an extremely high probability that the ECB will begin easing monetary policy at the June meeting. At the same time, he warned that the prospects for further interest rate cuts remain uncertain.
Following its April meeting, the European Central Bank (ECB) left its main refinancing rate unchanged at 4.50 per cent, as widely anticipated. In its policy statement, the ECB noted that if Governing Council’s updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction. Meanwhile, ECB president Christine Lagarde noted at her post-meeting press conference that ECB will get some data in April and, in June, it will have a lot more data and information, as well as new projections. Markets currently see 75 basis points of cuts in the ECB's 4% deposit rate this year, or two full moves beyond June.
"If the situation continues to develop as it has developed recently, in June we will be ready to move to lower interest rates," de Guindos said, adding that inflation is likely to fluctuate near the current level in the coming months, but will reach the ECB's 2% target next year.
Meanwhile, de Guindos pointed out some risks that could affect ECB decisions, namely changes in wages, productivity, unit labor costs, profit margins and geopolitical risks.