ECB Minutes Reveal Consensus On Risk Of Cutting Policy Rates Too Early
(RTTNews) - European Central Bank policymakers agreed in their meeting late January that it was premature to discuss interest rate cuts now which could derail the return of inflation to the 2 percent target, minutes of the policy session held on January 24-25 showed Thursday. "The risk of cutting policy rates too early was still seen as outweighing that of cutting rates too late," the minutes, which the ECB calls "account" showed.
"Having to reverse course, in the event that economic activity picked up more strongly than expected, wage growth accelerated or renewed inflationary pressures emerged, could entail high reputational costs."
Further, it was pointed out that the risk of an inadvertent overtightening of monetary policy was mitigated by the fact that financial markets were already pricing in a number of rate cuts in 2024. This contributed to a loosening of both financial and financing conditions. The Governing Council also considered the argument that such a loosening might be premature and could possibly derail or delay a timely return of inflation to target.
Hence, members agreed that it was important to follow a data-dependent rather than a calendar-based approach. Markets widely expect the ECB to announce an interest rate cut in April or June.
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