ECB: Outlook for Rate Cut in September

According to the Governing Council of the European Central Bank, September could be a good month to cut interest rates. This can be read in the minutes of the institute’s meeting, held on July 17-18 and published on August 22, at which it was decided to leave rates unchanged.

The goal remains to keep inflation in check: “Members emphasized that they remained determined to ensure that inflation returned to the medium-term target of 2% in a timely manner and that they would keep discount rates sufficiently restrictive for as long as needed to achieve this objective.” Inflation is expected to remain stable until the end of 2024 and then fall to the 2% target in 2025 and stabilize in 2026.

The ECB then explains that it does not intend to commit to monetary policy in advance, maintaining a strategy based on observing data as it becomes available. “It was also considered important to maintain a data-driven and individualized approach to determining the appropriate level and duration of restrictions. No need to commit to a particular rate trajectory in advance, as the exact pace at which inflation will return to target remains uncertain.”

Nevertheless, the performance of the real economy also matters, and thus “the September meeting was widely recognized as a good time to reassess the level of monetary policy constraints. The meeting should be approached in an unbiased manner, which means that reliance on data does not mean an overemphasis on individual specific data.”