Bundesbank President: The likelihood of the ECB cutting interest rates before summer is up

Nagel, in a statement to the financial news service MNI’s online broadcast, commented on when the ECB would start its interest rate cut cycle.

Also a member of the ECB’s Governing Council, Nagel stated that inflation in the Eurozone is moving towards the ECB’s target of 2 percent, indicating that the Bank will probably cut interest rates in June. Nagel said, “The probability of seeing the first interest rate cut before the summer vacation is increasing.”

Nagel reiterated that the start of the ECB’s interest rate cut cycle would depend on the data, stating that he did not expect “automaticity in policy easing” from the Bank.

Nagel stated that the ECB should approach the first interest rate cut cautiously, and what happens after the first interest rate cut will also depend on the data.

Nagel noted that the probability of the ECB’s first interest rate cut taking place in June 2024 is higher compared to April 2024.

Meanwhile, annual inflation in the Eurozone, which was 2.8 percent in January, fell to 2.6 percent in February. Core inflation in the 20-country region declined from 3.3 percent in January to 3.1 percent in February.

The ECB targets inflation at 2 percent.

The central bank presidents of the Netherlands, Slovakia, Spain, Ireland, and Greece had pointed to June for the interest rate cut.

Since July 2022, the ECB had raised interest rates by a total of 450 basis points in 10 consecutive meetings. The Bank raised the deposit rate to 4 percent at its September 2023 meeting and did not make any changes in its October, December, and January meetings.

The European Central Bank will meet to determine interest rates on April 11 and June 6.

source: prepared by Melisa Beğiç

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