European Central Bank vice president Luis de Guindos said in an interview with Oberösterreichische Nachrichten, published on the ECB's website today, that a rate reduction of 25 basis points next month looks reasonable.
However, the official noted that the ECB's policymakers have made no decisions on the number of interest rate cuts or their size given a huge degree of uncertainty. He added that the ECB's actions will depend on how economic data evolves.
Asked if rate increases were possible, Guindos said that is not the ECB's base scenario.
The ECB's vice president also admitted that the policymakers believe that inflation will fluctuate in the short term and will sustainably converge to their definition of price stability, i.e., 2%, in 2025. He warned, however, that the ECB must remain very cautious as there are some risks, including how wages are evolving, what is happening with productivity, unit labour costs and declining profit margins, and geopolitical risks and uncertainties. "Nothing is predetermined with regard to cuts or changes in interest rates," de Guindos highlighted.