ECB’s de Cos: Some Time Left Before We Cut Interest Rates

15 February 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Pablo Hernández de Cos on Thursday said that the ECB was not yet ready to cut interest rates, but that this would be the next monetary policy move.

Speaking at CUNEF university in Madrid, de Cos, who heads the Banco de España, said, ‘The next move in interest rates is going to be a cut. We are not being explicit on when that will happen, I think there is some time left for that, but it is important to underline that the ECB's target is the 2% symmetric target.’

De Cos noted that slower economic activity had not yet led to higher joblessness in major euro area economies. If the perception of employers that demand would recover in an environment of labour shortages turned out to be correct, ‘this would mean that the recovery in activity projected for the coming quarters would be less employment-intensive and compatible, therefore, with an improvement in labour productivity.’

‘This is, in fact, the implicit assumption in the Eurosystem's macroeconomic projections that makes it possible to make a recovery in real wages compatible with a moderation in inflation rates, thanks to the expected positive evolution of productivity and a moderation in business margins’, he added.