ECB rate cut coming, but not just yet, says Governing Council’s Kazimir By Reuters

FRANKFURT (Reuters) – The European Central Bank is increasingly confident that inflation is coming down, but should still hold off on an interest rate cut until June, Slovak Governing Council member Peter Kazimir said on Monday.

The ECB held rates unchanged at a record high last week, but its chief Christine Lagarde said discussions over easing policy have begun and plenty of relevant information would become available by June.

“We will learn a bit more in April, but only in June, with new forecasts at hand, will the level of confidence reach the threshold,” Kazimir, the conservative chief of Slovakia’s central bank, said in a blog post.

“The current picture clearly favours staying calm for the coming weeks and delivering the first rate cut in summer,” he added.

Markets now see four interest rate cuts this year, with the first move coming in June, indicating that investors are betting on a move at all but one meeting between June and December.

Sources close to the discussion told Reuters on Friday that a clear majority of policymakers were in favour of a June move, and some have privately floated the idea of further move in July to win over a small group that would prefer an earlier start.

Kazimir said confidence was “gradually building” that inflation would come back to the 2% target next year, but warned that wage pressures still remain far too high, despite a noted slowdown.

He added that looser fiscal policy, a rebound in prices and the hefty cost of the green transition also add to potential upside risks.

“This doesn’t mean we won’t discuss how to dial back our restrictive policy stance in the meantime,” Kazimir said. “On the contrary, we will use the weeks ahead to do just that.”

Once rates start coming down, Kazimir said he favours a smooth and steady cycle of easing.