A cyclist rides along the road under a railway bridge near the European Central Bank (ECB) headquarters in Frankfurt am Main in western Germany, before the ECB’s press conference on euro zone monetary policy on July 18, 2024.
Kirill Kudryavtsev | Kirill Kudryavtsev AFP | Getty Images
While both growth and inflation face downside risks, ECB policymakers are divided over whether they need to consider a sharp half-percentage point rate cut in December.
Shortly after the ECB’s comments publish The October meeting saw the first consecutive rate cuts in 13 years.
The move marks the central bank’s third quarter rate cut this year, a measure that markets have fully priced in after policymakers said inflation risks were easing and growth prospects were softening.
“I’m sure some of my colleagues will support a significant rate cut and some won’t. As far as I’m concerned,” Austrian central bank president Robert Holzmann told CNBC’s Karen Tso on Wednesday. , I would say I would look at the data.
Holzman said it was inevitable that policymakers would make the case for a deeper rate cut in December, but he argued that the ECB’s recent quarter-percentage point move was a “precautionary” move and that the central bank may still need to take Interest rate cuts.
“If things are as bad as some are claiming, we could have 25 more, (but) 50, I’m saying right now based on the data, no,” Holzman said.
European Central Bank President Christine Lagarde said last week that central bank policymakers only discussed the merits of a 25 basis point rate cut at the meeting, rather than a more substantial 50 basis point cut.
Huge interest rate changes “can be put on the agenda”
Recent Eurozone Inflation Revise fell to 1.7% in September The previous official estimate was 1.8%. This compares with a 2.2% increase in August.
September was the first month since June 2021 that euro zone inflation fell below the European Central Bank’s 2% target, marking the end of years of excessive price growth and reinforcing expectations of further interest rate cuts in the near future.
“I think we are very confident that inflation will return to our 2% target next year,” Dutch ECB Governing Council member Klaas Knot told CNBC on Wednesday.
“I would also say that I think the risks around that baseline are reasonably controlled,” he added.
“So if that does happen, and if the December forecast continues to confirm that, then we will be able to gradually take the brakes off and continue to cut rates until we reach neutral territory where we are no longer simulating the economy and we are no longer Slow down the economy.
Notte and Mario Centeno, president of the Bank of Portugal, said they would not rule out a half-percentage point interest rate cut at the ECB’s December meeting.
“The fact is, September’s inflation numbers were very low, well below our expectations. That’s true overall, and that’s true for core (inflation),” Centeno said on Wednesday.
“We need to build that into our story,” Centeno said. “Then we need to look at the data that’s coming in, the trends in the data that we’ve been observing, and certainly looking at 50 basis points because we’re still relying on the data and the data that we’re getting is pointing in that direction. “
The ECB has repeatedly warned that inflation could rise in the coming months before falling to its target next year.
With inflation falling in many high-income countries, several major central banks have recently taken steps to ease monetary policy.
Still, the International Monetary Fund said on Tuesday that while the global fight against inflation “almost won”, downside risks “are increasing and now dominate the outlook.
—CNBC’s Jenni Reid contributed to this report.
