ECB Executive Committee member and economist Schnabel said in an interview recently that according to new data and forecasts, interest rate cuts in June may be appropriate, but the trend after June is even more uncertain. Recent data confirmed that the last kilometer of deflation was the hardest.
ECB board member Schnabel warned not to cut interest rates continuously in the face of lingering inflation risks. The ECB is preparing for the June meeting and is expected to cut interest rates.
In an interview, Schnabel said that although the June interest rate cut may depend on upcoming data and forecasts, other than that, things are not so certain.
On April 11, the ECB kept interest rates at a record high for the fifth consecutive meeting, but it is expected to reduce interest rates to 3.75% from the current 4% at the June 6 meeting.
Schnabel said, “The road after June is even more uncertain. Recent data has confirmed that the last mile of fighting inflation is the hardest.”She added that cutting interest rates in July seemed unreasonable.
The ECB governor added: “After so many years of high inflation, and the risk of inflation still tends to rise, starting the easing process early will bring the risk of premature relaxation.”
Eurozone core inflation fell from 2.9% to 2.7% in April. The ECB has set an inflation target of 2%.
Schnabel pointed out that the market is currently also facing “very high uncertainty.”It also emphasized that market participants have moved from cutting interest rates six times at the beginning of the year to cutting interest rates about three times now.
The ECB said in a recent financial stability assessment report that geopolitical tension and policy uncertainty in a series of global elections this year also posed a risk to financial stability in the Eurozone.
The assessment, however, emphasized that financial stability had improved.
ECB Vice President Degindos said in the report: “From today's perspective, the risk of a recent deep recession accompanied by rising unemployment is much lower. The rise in unemployment was a major source of concern six months ago.”
Based on the above news, the ECB will hold an interest rate decision on June 6. The market currently predicts that interest rate cuts will hurt the euro against the US dollar, and it is expected that it will fall further from a high level.
EURUSD daily chart
At 14:21 Beijing time on May 17, EUR/USD reported 1.0866/67