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The ECB does not have to temper the still fragile economy.

ByEditor

Feb 12, 2024

European Central Bank (ECB) board member Piero Cipollone stated on Monday that the ECB does not need to further hinder the euro zone’s economy to curb inflation as demand is still weak. This marks Cipollone’s first remarks on monetary policy since he joined the ECB late last year. It is likely that his comments align with the dovish tradition of his predecessor and fellow Italian, Fabio Panetta.

The ECB is currently considering whether to begin lowering borrowing costs due to slowing inflation and a stagnant economy following last year’s record-high interest rate hikes. However, Cipollone did not directly comment on this matter. He emphasized that there is no need to further hold back an already weak economy and that a potential recovery does not require higher inflation in order to happen.

In contrast, Panetta, who is now the governor of the Bank of Italy, stated on Saturday that the time to cut rates was “fast approaching.” However, the current consensus among the 26 policymakers responsible for setting policy for the euro area is that more evidence is needed, particularly regarding wage growth, before borrowing costs can be reduced.

Investors were previously anticipating the ECB to begin cutting rates as early as March. However, they now predict that there is a 50% chance of a first rate cut in April, followed by further reductions that could take the rate on bank deposits to 2.75% – 3.00% by the end of the year, down from the current 4.0%.

By Editor

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