The European Central Bank considered it “plausible” in April to start lowering its key rates in June if the data confirms the anticipated return of inflation to the 2% target by then, according to the minutes of its meeting published Friday May 10.
It was considered plausible that the Governing Council, the body that decides the course of monetary policy within the European Central Bank (ECB), would be able to start easing its currently record-high rates at the meeting. of June, the document states.
This is on the condition that the battery of additional indicators revealed by then confirm the medium-term inflation outlook which sees the progression of the index return to 2% in 2025, after 2.3% in 2024, according to projections by the monetary institution in March.
Inflation below 2%?
In April, the ECB decided to leave its rates unchanged, the main one on deposits remaining at 4.0%, the level reached last September. Some members around the council table argued for loosening the monetary screw from April, judging that the economic conditions were met without having to wait.
Overall, a broad consensus emerged to cautiously wait for the next monetary policy meeting which should provide more conviction on the return to normal of inflation, according to the document. If the next projections available in June confirm that inflation is on track to fall below 2% in the second half of 2025, a rate cut will then be a fait accompli, comments Carsten Brzeski, economist at ING.
Uncertainties about disinflation, the evolution of wages…
In April, the ECB opened the way for a rate cut from June but refrained from sending signals on the evolution of rates beyond that. Uncertainty remains over disinflation in services and wage developments, over the geopolitical environment and over what the American Federal Reserve will decide on its rates.
In this context which does not exclude a temporary return of inflation, the ECB’s easing cycle will continue slowly, probably at the rate of 25 basis points per quarter, according to Unicredit economists.