Several ECB advisors, led by Germany and France, support lowering rates before the summer

MADRID, 8 Mar.

Several ECB advisors, led by Germany and France, support lowering rates before the summer


The governors of a handful of central banks of euro zone countries and, therefore, members of the Governing Council of the European Central Bank (ECB), led by the presidents of the Bundesbank and the Bank of France, have supported this Friday the possibility that the first interest rate cut will arrive before the summer, ensuring that it will be an issue to be discussed at the meetings in April or more likely June.

In this way, the monetary authorities of countries such as Germany, France, but also those of Finland and Estonia, have highlighted that the disinflation process underway in the eurozone, which has allowed price pressures to be reduced at a greater rate than expected , clears the way for an easing of the ECB's restrictive stance in the coming months if incoming data confirms this development.

In this sense, the president of the Bundesbank, Joachim Nagel, acknowledged this Friday that the probability "is increasing" that the ECB will undertake a first reduction in interest rates before the usual summer break, although he has defended that any decision will depend on the evolution of the data.

"The probability is increasing that we could see a rate cut before the summer holidays. But that will clearly depend on the data," he said in an interview on the 'Table.Today' podcast, collected by Europa Press, where the German central banker has acknowledged that "the outlook has changed and improved."

In an even more 'dovish' tone than his German counterpart, the governor of the Bank of France, Francois Villeroy de Galhau, considered this Friday "very likely" that the first reduction in interest rates in the euro zone will take place "in the spring ", remembering that this season includes April and until June 21.

"It seems very likely to me that there will be a first rate reduction in spring, I remind you that in Europe, as in other places, spring is a season that runs from April to June 21," said Christine Lagarde's compatriot in a interview with BFM TV.

In this sense, the governor of the Bank of France has indicated that the ECB must face a double risk, since "there is the danger of rushing" and cutting rates too soon, running the risk of not reaching the inflation target of 2 %, but also the danger of acting too late and hindering activity too much.

In this sense, Olli Rehn, president of the Bank of Finland, highlights in an article published today the change in the ECB's communication, which before yesterday's meeting had not discussed interest rate cuts. "However, yesterday we began a debate on how to begin to lift the brakes on monetary policy," he noted.

"It is time to discuss how we adjust monetary policy to a lower level, that is, how we reduce its restrictive dimensions," defended the former European commissioner, for whom the risks related to a premature reduction in rates "have substantially decreased" by while growth forecasts deteriorate. "We will return to the topic at the next meetings in April and June based on the most recent information," he summarized.

For his part, the governor of the Bank of Estonia, Madis Müller, was the one who showed the least enthusiasm for the possibility of starting rate cuts in future meetings, limiting himself to pointing out that, at Thursday's meeting, the ECB Council decided to leave the unchanged interest rates, because it needs "stronger confirmation that the downward trend in prices will continue before starting interest rate cuts."

However, the Estonian central banker has admitted that it is possible that this feeling of confidence will rise to sufficient levels in view of the economic indicators in the coming months.

In the press conference after this Thursday's meeting of the Governing Council of the ECB, the president of the institution, Christine Lagarde, assured that the ongoing disinflation process gave greater confidence to the entity, although not yet enough, Therefore, he stressed the need to have more data, adding that a little more information will be available in April, but "much more in June."

Likewise, Lagarde also defended in her speech yesterday that the ECB acts independently of the United States Federal Reserve and will do "what it has to do when it has to do it", apart from being aware of the international environment in which it operates. and in which the US central bank also acts.

In this sense, Olli Rehn defended this Friday that the ECB "is not the 13th Federal District of the Federal Reserve, that is, a regional central bank", which is why the comments that it cannot lower rates before the Fed "They are very exaggerated."

The Governing Council of the ECB plans to meet again in Frankfurt to evaluate the monetary policy of the euro zone on April 11, although the consensus of analysts considers it more likely that the key date for the first rate cut will be the following , which will take place on June 6, while the institution's governing body will meet again, already in the summer, on July 18, before the holiday break until September 12.