Yannis Stournaras, European Central Bank (ECB) Governing Council member and Bank of Greece Governor, said that during the next three meetings, the ECB should cut interest rates twice and twice more after the summer holidays, which is consistent with market expectations.
Last week, the ECB again left interest rates unchanged, but policymakers signaled that they could begin easing monetary policy at the June meeting, if the inflationary situation allows. According to official data, the eurozone annual inflation slowed again in February, but was higher than economists' forecasts. Core inflation reached its lowest level since March 2022, but also exceeded consensus estimates. According to the report, the consumer price index rose by 2.6% per year after rising by 2.8% per year in January. Economists had expected an increase of 2.5%. Meanwhile, on a monthly basis, the consumer price index rose by 0.6%, offsetting the January decline (-0.4%). The core consumer price index - energy, food, alcohol & tobacco - rose by 3.1% per year after an increase of 3.3% per year in January. Economists had expected an increase of 2.9% per annum.
“We will have little new information before the April meeting, especially on wages in early 2024, but we will get much more data before the June meeting. I think that in order to lower rates in April, we will need to see the collapse of the economy, but I do not expect this," Stournaras said, adding that economic growth in the euro area is much weaker than expected and risks are to the downside, while inflation risks are balanced.
Stournaras also stated that real wages are likely to reach pre-pandemic levels only in 2025, indicating that wages are still catching up, not leading inflation.