ECB’s Holzmann: Could Be Room to Cut Interest Rates Again in December

13 September 2024

By David Barwick – FRANKFURT (Econostream) – The European Central Bank may have enough leeway to cut interest rates by another 25bp in December, Governing Council member Robert Holzmann said Friday.

In an interview with the FT, Holzmann, who heads the Austrian National Bank, said, ‘Monetary policy is now on a good trajectory. We have started to be on an [easing] path, and headline inflation has continued to fall.’

As a result, a further downward move might be possible in December, and the process could continue to about 2.5% as of the middle of next year and thus near the neutral rate, the newspaper reported him to have said.

Holzmann expressed scepticism about the possibility of a cut in October, given the paucity of information to become available between now and then.

While vigilance was still called for in view of persistently high services inflation, there were grounds to be more confident about the outlook, he said.

‘This uncertainty has become significantly smaller over the past two and a half months’, he said.

Holzmann, who supported Thursday’s rate cut, had been the lone holdout when the ECB began easing borrowing costs in June.

‘I am not per se against lowering rates, I only object when the timing does not look right’, he said.

The expected increase of inflation in the final months of the year was ‘a statistical artefact due to base effects’ that policymakers could disregard, he said.

‘It will be a demanding task to explain a temporary rise in core inflation properly’, he said. ‘However, it’s necessary, otherwise trust in the central bank might suffer.’