Exclusive: ECB’s Holzmann: 2% HICP Only in 2Q '26 Would Mean We’re Clearly Not Where We Should Be

29 August 2024

By David Barwick and Marta Vilar – ALPBACH, Austria (Econostream) – By the time of the upcoming monetary policy meeting of the European Central Bank Governing Council there would ideally be more positive data available for the ECB’s decision-making, according to Council member Robert Holzmann on Wednesday.

In an interview with Econostream on the margins of the European Forum Alpbach, Holzmann, who heads the Austrian National Bank, indicated some concern about the possibility of the ECB’s price stability target slipping further away into the future.

‘If we see 2% inflation slipping out to ’26, not only to the first quarter, but to the second, then this would be a very strong indication that we are not yet where we need to be in terms of price stability’, he said.

The updated macroeconomic projections will be unveiled at the 12 September meeting of the Governing Council, and Holzmann acknowledged that these had not yet been made available to Council members.

While declining to pre-commit to supporting or opposing another rate cut in two weeks, Holzmann sounded sceptical about the wisdom of further easing and left no doubt that he considered great caution appropriate.

He observed for example that ‘September or at the latest October will be the first month with no more base effects dropping out of inflation.’

‘If core inflation remains high, it will feed back into the headline rate’, he warned. ‘That's a reason to be very careful.’

Moreover, both the US and Europe were at risk from fiscal policies that might in fact be ‘the biggest threat’, he said.

‘I see support on both sides for major expenditure programmes, but I don’t see counter-financing, which is worrisome’, he said.

Still, Holzmann made clear that he was not opposed to lower borrowing costs on principle, even if the current situation did not predispose him to endorse further easing.

‘It's not that I'm against lower interest rates, but one has to be careful, or one could be forced to take a step back’, he said. ‘Hopefully we’ll have more positive information by September 12.’

Should the ECB decide against another rate cut in September, then October would be the next occasion at which to consider the possibility, he said, despite the absence of updated projections. ‘We’re data-driven’, he insisted, and there were incoming data at every Council meeting.