Countdown to April: Latest ECB Governing Council Tally Points Yet More Strongly Toward Another Rate Cut

24 March 2025

Countdown to April: Latest ECB Governing Council Tally Points Yet More Strongly Toward Another Rate Cut

By David Barwick – FRANKFURT (Econostream) – Following our initial member-by-member review of the European Central Bank Governing Council exactly two weeks ago, it is time to take another look at where policymakers stand regarding the April decision to cut or to pause.

As last time, we would emphasise that with more than three weeks still to go, much can still happen to make one option or the other the clear choice, and today’s tally could easily turn out to have pointed in the wrong direction.

We again split policymakers into three categories: those probably more likely to support pausing in April, those we would refrain for the moment from classifying, and those probably more likely to support cutting in April.

More than anything else, it is worth highlighting the changes with respect to the result we obtained two weeks ago. There are not many, but all three tend to support the idea of an April cut.

In particular, Dutch National Bank Governor Klaas Knot, previously assigned to the category of those inclined toward an April pause, is now in the group of those whose position is less clear.

Admittedly, we lacked a fresh quote from him at the time that would have backed up our classification, a circumstance that forced us to make an assumption. What he has said since then suggests that, contrary to our assumption, he is open to either outcome and may even lean slightly dovish.

Then there is ECB Vice President Luis de Guindos, who expressed himself at length in an interview on March 16. As we assessed at the time, those comments clearly support reclassifying him as favouring further easing rather than leaving him as before in the ‘unclear’ group.

Finally, our interview last week with Central Bank of Malta Acting Governor Alexander Demarco also brought clarity – to our mind – as to his likely preference next month, and so, as in the case of de Guindos, we take Demarco out of the ‘unclear’ group and place him in the category of those probably tending to want to cut again.

Note that our other Governing Council interview last week, namely with Bank of Greece Governor Yannis Stournaras, does not lead to any change in the tally, as we already believed that he was more likely to want to ease further and he essentially fully confirmed this view.

We wind up with six Governing Council members in the group of those probably more likely to support pausing in April. Another eight are in the group of those we aren’t calling either way, while those we suspect are leaning towards cutting again next month now number eleven (the total being 25 because the Bank of Slovenia still lacks a governor).

If nothing else, this outcome probably raises the bar for developments over the next few weeks to rise to the standard of justifying a pause. Still, just to cite a few examples, March spot inflation data, the bank lending survey and US President Donald Trump’s 2 April tariff announcement are all still to come and could sway things in one direction or the other.

Moreover, we note again that our approach implicitly assigns the policy preferences of ECB President Christine Lagarde and Chief Economist Philip Lane a weight equal to that of any other Council member, which abstracts a bit from reality.

Therefore, we still regard the below as tentative.

Probably more likely to support pausing in April:

Austrian National Bank Governor Robert Holzmann:

  • 14 March 2025: ‘I am in favour of a possible interest rate pause in April.’

ECB Executive Board member Isabel Schnabel:

  • 08 March 2025: The risk that inflation will remain above 2% longer than expected is higher than the risk that it falls sustainably below 2%.’

Eesti Pank Governor Madis Müller:

  • 07 March 2025: ‘[W]e as central bankers need to be vigilant, as several factors, such as tariffs or the impact of defense spending, could accelerate price increases in the near future. To me, this means that we need to be increasingly cautious about further interest rate cuts.’

National Bank of Belgium Governor Pierre Wunsch:

  • 24 February 2025: ‘I’m not pleading for a pause in April, but we must not sleepwalk to 2% without thinking about it. Let’s keep it open: If the data justify a new cut, we’ll cut. If they don’t, we might have to pause.’

National Bank of Slovakia Governor Peter Kažimír:

  • 10 March 2025: ‘Despite encouraging inflation trends, I am still looking for undeniable confirmation that disinflation will stay. Unfortunately, inflation risks remain tilted to the upside.’

Central Bank of Luxembourg Governor Gaston Reinesch

Too unclear to call:

ECB President Christine Lagarde

  • 20 March 2025: ‘Our monetary policy is becoming meaningfully less restrictive. New borrowing is becoming less expensive for firms and households, while loan growth is picking up. At the same time, past interest rate hikes are still being transmitted to the stock of loans, and lending remains subdued overall. We are determined to ensure that inflation stabilises sustainably at our 2% medium-term target. Especially in current conditions of rising uncertainty, we will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance. We are not pre-committing to a particular rate path.’

ECB Chief Economist Philip Lane

Dutch National Bank Governor Klaas Knot

  • 20 March 2025: ‘Can we afford to lower [interest rates]? I remain open-minded, but we do have to think it through, and there is time for that, but there is still too much unfamiliarity in that area. … Policy from the US, which can generate inflation, doesn’t necessarily jump over to the EU, but you can also argue for a story that growth is going to be weaker. It is incredibly difficult to say where interest rates are going to move.’

ECB Executive Board member Frank Elderson

Banco de España Governor José Luis Escrivá

Croatian National Bank Governor Boris Vujčić

Central Bank of Cyprus Governor Christodoulos Patsalides

Central Bank of Ireland Governor Gabriel Makhlouf

Probably more likely to support cutting in April:

ECB Vice President Luis de Guindos:

  • 16 March 2025: ‘The disinflation process is on track. There was a small pick-up inflation in recent months, but this had been expected, mostly on account of unfavourable base effects in November, December and January. The main reason for our confidence that inflation will come down to 2% is that all indicators for services and underlying inflation are moving in the right direction. A very important one is compensation per employee. According to recent data and in line with our projections, wage growth is moderating, which will help services inflation to gradually decline. At the same time, we need to keep in mind that factors like tariffs and fiscal policy are causing a lot of uncertainty. But taking this into account, we are confident that headline inflation will converge on a sustainable basis towards our 2% medium-term target towards the end of this year or the beginning of next.’

Central Bank of Malta Acting Governor Alexander Demarco:

  • 19 March 2025: ‘Our latest projections show us pretty much on track in achieving our objective, even if reaching 2% has perhaps been pushed out to early 2026 or late 2025. But the revisions of the previous projections were driven entirely by energy prices and the exchange rate, and since then, we've seen important changes in these components, both in the direction of lower price pressures. And maybe there will be effects from tariffs; this is unclear and I am not even sure this will be clear in April. So, for now, we are guided by the projections we have, but if energy prices and the exchange rate remain as they are today, the projections will probably show 2% achieved even earlier. So, I’m not sure it’s the right time to pause, because the evidence still shows us moving in the right direction.’

Banco de Portugal Governor Mario Centeno:

  • 07 March 2025: ‘We do think that the journey is very clear … We do have in our baseline a projection of inflation going to 2% in the medium term, but that includes further adjustment in the rates.’

Bank of Lithuania Chairman of the Board Gediminas Šimkus:

  • 20 February 2025: ‘Generally, I agree with market expectations that there might be another three cuts between now and the end of 2025. … the direction of travel is clear in a context of weak economic developments and with data showing that we’ve hit our medium-term inflation target. So, I don't see any good reason for policy to stay anywhere far from the interval I described as nominal neutral, which is around 2%. Policy needs to return to this interval around 2%.’

Latvijas Banka Governor Mārtiņš Kazāks:

  • 07 March 2025: ‘If we stay within the baseline scenario, then of course the rate scenario is incorporated in the forecasts. So, of course that can still materialise. The question is how the world will look in April, what will have changed, whether there will be a shift in the outlook that forces a shift in our baseline.’

Banque de France Governor François Villeroy de Galhau:

  • 20 March 2025: ‘I’m not worried about inflation in Europe. Probably the ECB still has margin for rate cuts. We’ll see at what pace in this uncertain environment.’

Bundesbank President Joachim Nagel:

  • 25 February 2025: ‘[P]erhaps I will end up sometime with the conclusion that we're no longer tight. But from today's perspective, I cannot say that.’

Bank of Greece Governor Yannis Stournaras:

  • 21 March 2025: ‘If it was today, I would be more certain that we're going to have a cut, because February inflation was 2.3%, in line with our path, and the materialisation of our forecast also depends on bringing down interest rates more. Also, data from 4Q show wage growth decelerating. Services inflation is down. Core inflation is also down. Everything points in the direction of a cut in April.’

ECB Executive Board member Piero Cipollone:

  • 24 March 2025: ‘At the time of our March meeting, markets were pricing in a reduction in interest rates over the coming months, including going below 2%, with rates stabilising around that level. To produce our macroeconomic projections we take as given the rate path being priced in by markets and, despite rates being on a downward trajectory, the projections showed inflation converging towards our target at the beginning of 2026, with slightly weaker growth. Since then, not only has this narrative been confirmed, but key issues have arisen that have strengthened the arguments in favour of continuing to lower rates.’

Banca d’Italia Governor Fabio Panetta:

  • 18 February 2025: ‘[M]onetary policy continues to exert a downward pressure on economic activity and on inflation, an effect that is less and less necessary with near-target inflation and persistently weak domestic demand. According to the projections published by the Eurosystem in December, inflation would hit the target if the key interest rates were lowered to around 2% in mid-2025, in line with the market expectations prevailing at the time. Under this scenario, a less decisive easing of monetary policy could lead to excessively low inflation in the medium term.’

Bank of Finland Governor Olli Rehn