ECB Policymakers Increasingly Confident Of Inflation Falling To 2% Target - Minutes

(RTTNews) - The European Central Bank's rate-setters were increasingly confident of inflation on track to reach the 2 percent target, but saw the need for patience even as they agreed the scope for an interest rate cut has strengthened, minutes of the March 6-7 policy session showed Thursday. "Overall, members expressed increased confidence that inflation was on track to decline sustainably to the 2 percent inflation target in a timely manner," the minutes, which the ECB calls the "account", showed.

"However, patience and caution were still needed, and more evidence and data were required for the Governing Council to be sufficiently confident that the task had been accomplished."

"While it was wise to await incoming data and evidence, the case for considering rate cuts was strengthening," the minutes said.

Members agreed that there was no room for complacency as they assessed that the disinflationary process remained fragile even as it was solid and robust, and conditional on a number of benign assumptions about wages, profits and productivity. ECB policymakers assessed that the the risks of overshooting versus undershooting the inflation target in the medium term were broadly balanced or becoming more balanced.

Markets widely expect the ECB to cut rates in June and the recent comments from policymakers, including President Christine Lagarde, have signaled the same. However, Eurozone inflation data released on Wednesday served to raise expectations of an imminent rate cut to some extent. Headline inflation in the euro area slowed to 2.4 percent in March from 2.6 percent in February. Core inflation that excludes volatile prices of food and energy eased more-than-expected to 2.9 percent in March from 3.1 percent in the previous month.

The ECB is set to meet next on April 11.

ING economist Carsten Brzeski said a rate cut next week is highly unlikely.

"Not only is actual inflation still above target and services inflation still too high, the ECB will not easily give the all-clear on inflation. The risk of reflation remains too high," Brzeski said.

"This is why we expect the ECB to wait until the June meeting as this will be the meeting with a full batch of important data available: a fresh round of ECB staff forecasts, GDP growth and wage growth data for the first quarter of 2024 and results of the Bank Lending Survey..."