ECB’s de Guindos: Prudent to Cut Interest Rates by 0.25BP in June

23 May 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Vice President Luis de Guindos on Thursday said that the ECB had been clear regarding a possible interest rate cut at the June meeting and that a reduction of 25bp would be wise.

In an interview with Austrian daily Oberösterreichische Nachrichten, de Guindos was asked whether an interest rate cut in June was certain, to which he answered, ‘We have been very transparent about the decision at the June meeting. And we are taking a prudent approach, which would argue in favour of a reduction of 25bp.’

Further reductions after June would depend on the incoming data, he said.

‘There is a huge degree of uncertainty. We have made no decisions on the number of interest rate cuts or on their size. We will see how economic data evolve’, he said.

In the short term, inflation was projected to fluctuate, and, in 2025 it would converge to the 2% target, he said, adding that nothing was predetermined, and it was necessary to ‘remain very cautious.’

‘But there are some risks: how wages are evolving, what is happening with productivity, unit labour costs and declining profit margins, to name the main factors’, he said. ‘Added to that are geopolitical risks and uncertainties – Russia’s war in Ukraine, the conflict in the Middle East, possible tensions in Southeast Asia.’

Asked about high interest rates in indebted countries, he said some of countries with high debt were growing above average and that the recent fall in sovereign bond yields was a ‘very good sign, as the ECB’s intervention in the market is substantially declining and will end at the end of the year.’

The capital markets union would be important to unify rules and make Europe more attractive to investments, he said, adding that right now, there were more opportunities for investors being created in the United States and in China.