FRANKFURT (Reuters) – The European Central Bank will be in position to discuss an interest rate cut in June, Vice President Luis de Guindos said on Tuesday, joining a long list of policymakers putting the June 6 meeting on the table for a potential start of policy easing.
ECB President Christine Lagarde earlier this month said the bank was just beginning to discuss whether to dial back interest rates given a comforting fall in inflation and policymakers on both the hawkish and dovish side of the spectrum have endorsed that timeline.
Market investors are somewhat sceptical, however, and a cut is fully priced in only by July as concerns are growing that the U.S. Federal Reserve could delay its initial move and the ECB would be hesitant to move on its own.
“We haven’t yet discussed anything about future rate moves,” de Guindos told Greek newspaper Naftemporiki in an interview. “We need to gather more information. In June we will also have our new projections and we will be ready to discuss this.”
Among the 26 members of the Governing Council, the central bank governors of Spain, the Netherlands, Ireland, Greece and Slovakia have all publicly backed June while ECB chief economist Philip Lane backed a second quarter move, arguing that the ECB would have a “lot more” information by June.
De Guindos said the biggest risk to such a timeline was the combination of rapid wage growth and poor productivity.
“These two factors together could lead to a significant increase in unit labour costs,” he said. “And this is a risk, especially for services inflation, because services are labour intensive and shielded from foreign competition.”
(Reporting by Balazs Koranyi; Editing by Muralikumar Anantharaman and Kim Coghill)
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