ECB’s Reinesch: Grounds to Expect First Rate Cut at End of 2Q if Data Confirm Forecasts

15 March 2024

By David Barwick – FRANKFURT (Econostream) – The European Central Bank is likely to start cutting interest rates at the end of the second quarter if the latest information are consistent with current forecasts, according to ECB Governing Council member Gaston Reinesch.

In a blog post published Thursday on the website of the Central Bank of Luxembourg, which he heads, Reinesch said the Council was now ‘more, but not yet sufficiently confident about a timely return of inflation towards its medium-term target’ and thus left rates unchanged last week.

‘Provided the incoming data will confirm, in the light of the June 2024 Eurosystem staff macroeconomic projections, the current prospect of inflation returning timely to its 2% medium-term target, it is not at all groundless to anticipate a first rate reduction towards the end of the second quarter of 2024’, he said.

In a footnote to his remarks, Reinesch, arguably the Governing Council member who speaks publicly least frequently, noted that labour cost and profit developments were still uncertain, and that the reduction in projected euro area 2024 HICP was chiefly a consequence of ‘the more volatile energy component.’