The case for another European Central Bank interest rate cut is strengthening, ECB board member Piero Cipollone said on Monday, just days after another prominent policy dove made a similar argument.
The ECB has cut interest rates six times since last June but provided few signals about its next move after the most recent reduction at its March meeting, arguing that uncertainty is simply too high for the bank to guide markets.
Economic conditions have shifted since that meeting, however, Cipollone argued, and inflation may be coming down quicker than expected.
"Key issues have arisen that have strengthened the arguments in favour of continuing to lower rates," he said in an interview with Spanish newspaper Expansion. "We are likely to reach our inflation objective sooner than our latest projections indicate."
Greek central bank chief Yannis Stournaras made a similar argument on Friday, arguing that everything was pointing in the direction of a cut in April.
Cipollone said that energy prices have fallen significantly since the March 6 meeting, the euro has appreciated and real rates have increased, all contributing to a faster drop in inflation.
"And if the United States were to impose tariffs on European exports, that would have a negative impact on demand, which would further strengthen the downward trend in inflation," he said. "Trade tensions between China and the United States could lead to China redirecting its products to the European market, increasing the downward pressure on prices."
Financial markets see a roughly 60% chance of a rate cut in April but a move by June is fully priced in. Investors then see another cut, probably in December, taking the ECB's deposit rate to 2% by the close of 2025.
