• Mon. Feb 26th, 2024

ECB Board Member Advocates for a Less Extreme Approach to Monetary Policy Amid Rate Cut Uncertainty


Feb 12, 2024
ECB is not required to dampen the still weak economy.

ECB board member Piero Cipollone has stated that the European Central Bank does not need to make the euro zone’s economy even weaker in order to control inflation. In a dovish approach to monetary policy, he emphasized that demand is still weak. This view aligns with the position of his predecessor Fabio Panetta, who also believes that a weak economy does not need to be further curbed.

Despite this, other policymakers at the ECB, including Panetta, have indicated that the moment to cut rates is fast approaching. However, the prevailing view among the 26 policymakers for the euro area is that more evidence is needed, particularly concerning wage growth, before borrowing costs could be cut.

Chances of a rate cut are uncertain. Investors were betting on the ECB to start cutting rates in March, but now see a 50% chance of the first rate cut in April, followed by further reductions. These reductions could bring the rate on bank deposits to 2.75% – 3.00% by the end of the year from the current 4.0%.

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