ECB board of governors member Olli Rehn expressed the inclination towards reducing interest rates at a meeting held in early June. He highlighted that inflation in the eurozone had steadily decreased, with April’s inflation rate falling to 2.4%, marking the seventh consecutive month below 3%. This decrease has brought it close to the ECB’s target of 2%, making June an appropriate time for monetary policy adjustments.
ECB economist Philip Lane also supported easing restrictions if no major surprises occurred. Both leaders mentioned there were no significant risks associated with geopolitical situations or energy prices. The upcoming announcement of May inflation will provide more insight into the situation.
The ECB is set to hold a policy meeting on June 6, and market expectations are that reference interest rates will be reduced by another 25 basis points to 4%. The likelihood of the ECB moving faster than the US Federal Reserve (Fed) in making monetary policy decisions has been discussed among economists. Despite some hesitation, the Fed seems less likely to consider lowering interest rates in the near future, while recent data on the American economy and labor has led some experts to push back their forecasts for rate cuts. Economists believe that interest rate reduction paths taken by the ECB and Fed will differ significantly, with the latter remaining uncertain about its timeline for acting.
