English
ECB "dovish" calls for further easing, while other members are more cautious
European Central Bank (ECB) Executive Board member Piero Cipollone said on Monday the case for another European Central Bank interest rate cut was strengthening, even if other rate-setting Governing Council members remained cautious.
The European Central Bank (ECB) has cut interest rates six times since June last year but has not revealed its next move after the latest cut at its March meeting, saying uncertainty was too high for the central bank to guide markets.
However, Cipollone believes that economic conditions have changed since that meeting and inflation may fall faster than expected.
"The emergence of key issues strengthens the argument for continuing to lower interest rates," he told Spanish newspaper El Expansion. "We could reach our inflation target sooner than the latest forecasts suggest."
"If that path and our narrative are borne out, from my perspective there is room for further easing of our monetary policy," he said.
Yannis Stournaras, governor of the Bank of Greece, made similar comments on Friday, saying all signs point to a rate cut in April.
But Ireland's Gabriel Makhlouf, seen as a centrist on the 26-member governing council, took a more measured view, arguing that the extraordinary uncertainties needed to be handled with caution.
"We do need to be cautious about changes in the stance of monetary policy in situations where we are not yet on target for inflation and when there are very exceptional events around the world that could have a direct impact on inflation," Makhlouf told reporters in Dublin.
However, he believes inflation is moving in the right direction and he is not too worried about the exact timing of reaching the target.
Cipollone said that since the March 6 meeting, energy prices have fallen sharply, the euro has appreciated and real interest rates have risen, all of which have contributed to a faster decline in inflation.
"And if the U.S. imposes tariffs on European exports, this will have a negative impact on demand, further reinforcing the downward trend in inflation," he said. “Sino-US trade tensions could cause China to divert production to the European market, adding to downward pressure on prices.”
Financial markets are pricing in about a 60% chance of an ECB rate cut in April, but a June cut is fully priced in.
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