ECB Policymakers' Disclosures Pay Attention! Will the ECB Follow The Fed?


The European Central Bank is increasingly confident of cutting interest rates as eurozone inflation continues to decline, three ECB policymakers said on Monday.

ECB policymakers Philip Lane, Gediminas Simkus and Boris Vujcic said separately that the latest inflation and growth data boosted their confidence that inflation will return to the central bank's 2% target by the middle of next year.

European zone inflation was at 2.4% in April and a key indicator of underlying price pressures is slowing as the economy experiences some recovery.

"Both April's preliminary estimate for European zone inflation and the first-quarter GDP numbers released boost confidence that inflation will return to target in time," ECB Chief Economist Lane told Spanish newspaper El Confidencial.

Simkus, Lithuania's central bank governor, said he expected the ECB to cut rates three times by the end of 2024.

"My thinking is that there will be several other interest rate reductions coming in the future, for now there is no further explanation of how much, although I have stated that this year however I expect three reductions," Simkus told reporters in Vilnius .

The ECB is close to promising a rate cut on June 6 and money markets are almost entirely pricing in three cuts this year, with traders raising their expectations after some dovish rhetoric by the Federal Reserve and weak US jobs data last weekend.

"The data coming in so far is quite consistent with our estimates," Croatian governor Boris Vujcic said at the Vilnius event. "If the estimate remains, as we see it at the moment, I would expect a decrease in rates, but still within the appropriate range to keep inflation down to the 2% level."

Although the ECB insists it is independent of the Fed, a widening interest rate gap between the world's biggest central banks will weaken the euro and increase European inflation, which will likely limit the ECB's willingness to move on its own.

Lane said that April's inflation data finally showed progress on service prices but that the bank would continue to focus on services to ensure it did not prevent disinflation.