In an interview with Spanish newspaper El Confidencial, ECB Chief Economist Philip Lane emphasized that the case for a European Central Bank interest rate cut in June is gaining strength, particularly as services inflation shows signs of easing.
Lane stated that the ECB has essentially committed to a rate cut on June 6, contingent upon incoming data reinforcing policymakers’ confidence that inflation will return to its 2% target by the middle of next year. He expressed optimism regarding April’s flash estimate for euro area inflation and the first quarter GDP figures, indicating an improved outlook for inflation to reach its target.
While Lane acknowledged that investors largely anticipate a rate cut in June, he noted that doubts about subsequent policy moves have arisen following signals from the U.S. Federal Reserve suggesting a delay in its own policy easing.
Despite the ECB’s assertion of independence from the Fed, a widening interest rate gap between the two central banks could potentially weaken the euro and boost European inflation, thereby influencing the ECB’s decision-making process.
Lane highlighted the progress seen in April’s inflation data, particularly in services prices, but emphasized the ECB’s continued focus on services to prevent disinflationary pressures in the future.
Overall inflation stood at 2.4% last month, and the ECB anticipates it to hover around this level for most of the year before declining again in 2025.
