ECB’s Accounts Show a Firm Case For Lowering Interest Rates

(CTN News) – ECB policymakers are increasingly confident that inflation will return to their target of 2%, and the case for reducing interest rates is becoming stronger, according to the minutes of the bank’s March 6-7 meeting released Thursday.

At its June meeting, the ECB kept borrowing rates at record highs, but began cautiously preparing the groundwork for lowering them, arguing that good progress had been made in reducing inflation, even though wage growth remains a concern.

It has been noted that in the meeting accounts of the European Central Bank, members of the ECB indicated that they were more confident than they had been in the past about inflation declining sustainably to the 2% inflation target in the near future.

In spite of the fact that incoming data and evidence were to be awaited, the case for considering rate cuts had been strengthening for some time.”

Over the last few months, there has been a further drop in inflation and a moderated wage demand, as well as an indication that a modest recovery is on the way, based on growth indicators.

On April 11, the European Central Bank will meet for the next time, and policymakers will likely keep the June rate cut on the table, especially given that several of them have already endorsed it in the past.

Despite market expectations of 88 basis points of easing, or between three and four cuts this year, they are unlikely to commit to any subsequent actions even though markets are now pricing in 88 basis points of easing.

There is a major uncertainty regarding whether the U.S. Federal Reserve will be able to start reducing interest rates this summer.

In spite of the fact that the ECB could go it alone, policy divergence may weaken the euro and lead some investors to move their portfolio investments to the other side of the Atlantic, weakening the impact of the ECB’s cuts.

In spite of this, the euro zone economy is in its sixth straight quarter of quasi-stagnation, which is lagging behind most other economies, while inflation is also clearly heading back to target, which reinforces the case for lowering rates in the region.

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