Eurozone: Rising Chances of Rate Cuts

The ECB will meet on June 6; after 10 hikes in 2022 and 2023, rate remains unchanged in 2024

There seems to be a growing consensus among European bankers that monetary policy easing is imminent.

The European Central Bank (ECB) has scheduled a board meeting for June 6, the day it is expected to cut interest rates for the first time since continuous increases in 2022 and 2023 in an effort to curb a surge in inflation.

Bank of Italy Governor Fabio Panetta explained at a press conference on the sidelines of the G7 financial meeting in Stresa, Italy, that “inflation has a common underlying trend: it is declining in all major economic areas.” A fact that gives hope that at the next ECB meeting, there will be “conditions for adjusting monetary policy, as inflation is falling in all its components, and I think there is a fairly general consensus on the possibility of lowering rates. It’s true that the ECB’s mantra is that decisions are made meeting by meeting, but now that consensus has finally broadened.”

An important contribution came from Joachim Nagel, Chairman of the German Central Bank (Bundesbank), also present at the G7 meeting at Lake Maggiore, who made it clear that he agreed with Panetta on monetary easing that could open oxygen supply to the economy and avoid recessionary tendencies. A crucial fact, given that Germany was the leader among bankers pushing for ten consecutive increases occurring between 2022 and 2023.

Among the residual concerns is the trend of inflation in the USA, which is much less controllable than what is happening in the eurozone. Compared to what is going on in the USA, “there are indirect consequences compared to the assessment we have to make in the Governing Council: we use macroeconomic models, and so everything that happens in the United States has consequences in the European Union,” Nagel explained. This is reported by the Italian newspaper Messaggero.