ECB’s Schnabel Says July Cut Doesn’t Look Warranted - Hindustan Times
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ECB’s Schnabel Says July Cut Doesn’t Look Warranted

Bloomberg |
May 17, 2024 02:44 PM IST

European Central Bank Executive Board member Isabel Schnabel warned against back-to-back interest-rate cuts in June and July.

European Central Bank Executive Board member Isabel Schnabel warned against back-to-back interest-rate cuts in June and July.

ECB’s Schnabel Says July Cut Doesn’t Look Warranted
ECB’s Schnabel Says July Cut Doesn’t Look Warranted

“Based on current data, a rate cut in July does not seem warranted,” she told Nikkei newspaper in comments published Friday. “We should look very carefully at the data because there is a risk of easing prematurely.”

As euro-zone inflation nears the 2% target, ECB officials are in agreement over an initial reduction in the deposit rate next month but have been wary of discussing what will happen beyond. Schnabel’s remarks are the clearest signal yet that policymakers still concerned by rapid wage growth and geopolitical threats will take a breather at their following meeting. 

Money markets pared rate-cut bets slightly, according to swaps tied to policy-meeting dates. But traders still hold a strong conviction for quarter-point reductions in June, September and December, which would lower the deposit to 3.25% from the current high of 4%.

While Schnabel said June’s planned move “may be appropriate,” she urged a “cautious approach” in her interview with Nikkei. “And we should give ourselves sufficient time to see what is happening.”

The German official also said that given “very high uncertainty” and “with inflation risks still being tilted to the upside,” it is “too early to say what is going to happen and we cannot pre-commit to any particular rate path.”

Those sentiments were echoed later Friday by ECB Vice President Luis de Guindos.

“We have been very clear, for June we have been very transparent,” he said in Madrid. “And subsequently we have also been very transparent and we have said that we are going to be dependent on the data and how this data arrives at our meetings.”

Speaking in a separate interview with Austria’s News magazine, Robert Holzmann — one of the most hawkish members of the Governing Council — warned that the ECB must ensure that it doesn’t stop fighting inflation too soon.

If this happens, “there’s the danger that it accelerates again,” he said. “Getting a grip on inflation again in that situation would be extremely difficult.”

With assistance from Marton Eder, Macarena Muñoz and James Hirai.

This article was generated from an automated news agency feed without modifications to text.

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