European Central Bank Executive Board member Isabel Schnabel mentioned that the euro zone’s growth momentum has been increasing, which is a positive sign that the economy is recovering from the crisis. In a recent interview with German broadcaster ARD, Schnabel stated that there is hope for a return to price stability without entering a recession, as inflation is decreasing.
Policymakers are getting ready for an important meeting in two weeks, where they are likely to lower interest rates for the first time after a series of rate hikes. Schnabel confirmed the intentions to cut interest rates in June, provided that inflation projections align with their current outlook. She cautioned against rushing into further cuts, as this could pose a risk of easing prematurely, a sentiment also echoed by Bundesbank president Joachim Nagel.
Despite the cautious approach of Schnabel and Nagel, it seems that there is a growing consensus within the Governing Council for three quarter-point interest rate reductions this year, in line with market expectations. This development suggests that the ECB is taking a measured approach to support the economic recovery while maintaining price stability.