Analyzing the monetary policy announcements of the European Central Bank (ECB) after the April meeting, Rabobank analysts noted that the ECB gave some clear clues that there will be a reduction in the official interest rate in June.
The ECB is now more concerned about falling behind
“Although persistent pressures on services prices remain somewhat worrying, this does not seem to stand in the way of a first cut at the next monetary policy meeting. As we explain here, the Council seems to have now come to terms with that 1) the data (in the form of a weak economy and disinflationary forces) has continued to move in the right direction and that 2) a few cuts (let's start with one) would continue to keep policy restrictive enough not to derail the disinflation process “
Despite its “data dependency” mantra and the fact that inflation has not yet reached its target, the Council seems quite convinced that a cut would be appropriate: “We will not wait for everything to be at 2% before cutting “, validating the idea that the ECB is now more concerned about falling behind at some point than about making a policy mistake by easing too quickly and maintaining inflation stickiness and/or labor market stickiness. But by emphasizing its dependence on data and that it is not precommitting to any kind of easing path, it probably believes it can keep the risk of that second scenario materializing at an acceptable level.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
