ECB’s Schnabel: Possible June Rate Cut Would Be Compromise Decision

24 May 2024

By Isabel Teles – BONN, Germany (Econostream) – European Central Bank Executive Board member Isabel Schnabel on Friday said that that there were divergent views on the Governing Council about cutting interest rates, and that a consensus to cut in June would require a compromise.

After a speech at the Bonn-Frankfurt-Mannheim PhD Conference at the University of Bonn, which closely matched the remarks made by her one month ago at the ChaMP Inaugural Conference at the ECB, Schnabel was asked about her views on a possible interest rate cut in June.

‘The last mile narrative is not shared by everybody', she said. 'I think the data is pretty much in line with that, but not everybody shares that narrative, there are also people who are much more concerned about the potential undershooting of inflation...'

The latter argue that the euro area economy is 'very weak compared to the US, and if we stay as restrictive as we are, then we are going to push the economy possibly still into a recession and completely unnecessarily because we see that inflation is coming down', she explained.

The Governing Council ultimately needed to come to a decision despite the 'widely divergent views' of its 26 members, she said.

'The way President [Christine] Lagarde does it is that she tries to find a consensual decision', Schnabel continued. 'And for that, you have to make compromises and the June cut is probably one of such compromises – if it happens.'