FRANKFURT: The European Central Bank has made it “crystal clear” that interest rates could be cut in June but has also been firm that policy decisions beyond that remain up in the air, ECB Vice President Luis de Guindos said on Thursday.
The ECB put a June rate cut on the table last week and has spent the past week reinforcing that guidance, despite rising oil prices, a weaker euro and bets that its biggest peer, the US Federal Reserve, would delay its own rate cuts, Reuters reported.
“I think that we have been crystal clear: if things continue as they have been evolving lately, in June we’ll be ready to reduce the restriction of our monetary policy stance,” de Guindos told a parliamentary hearing in Brussels.
De Guindos repeated the ECB’s most recent guidance, that inflation, at 2.4 per cent in March, would hover near its current level over the coming months but would ease back to the ECB’s 2 per cent target next year.
Markets currently see 75 basis points of cuts in the central bank’s 4 per cent deposit rate this year, or two full moves beyond June, but de Guindos declined to be drawn on where rates are likely to go, even if some policymakers have already floated the idea of a second move in July.
“I would say that there are some risks,” de Guindos said. “The evolution of wages, productivity, unit labour cost, profit margins, and geopolitical risks are very difficult to take into consideration and to bear in mind when we elaborate our positions.”