The European Central Bank (ECB) has made it ‘crystal clear’ that interest rates could be lowered in June, but it has also indicated that decisions thereafter are not predetermined, said ECB Vice President Luis de Guindos today. The possibility of lowering the cost of money was announced by the eurozone central bank at last week’s meeting, and it currently maintains this stance despite rising oil prices, a weaker euro, and increasingly likely chances that the U.S. central bank will delay the start of a looser monetary policy.
– I think we have been crystal clear: if things continue to develop as they have recently, we will be ready to reduce the constraints of our monetary policy in June – said de Guindos in Brussels, as reported by Reuters. He reiterated the latest ECB guidelines that inflation, which stood at 2.4 percent in March, will remain close to its current level over the next few months but will decrease to the ECB’s target of two percent next year.
Markets currently expect a reduction of 75 basis points in the central bank’s four percent interest rate this year, or two cuts after June. However, de Guindos did not want to comment on where interest rates are likely to move, although some policymakers have already floated the idea of a second cut as early as July.
– I would say there are certain risks – said de Guindos. – The development of wages, productivity, labor costs, profit margins, and geopolitical risks is very difficult to take into account and keep in mind when we are formulating our positions – added the ECB Vice President.
