ECB: 'Date for a rate cut becomes 'visible''

"The date for a first rate cut is starting to become more clearly visible" and "the arguments in favour of a cut are strengthening". This is stated in the minutes of the ECB Governing Council of 6-7 March, which, however, adds that on that date the governors had 'a consensus that it would be premature to discuss a rate cut on this occasion'. Indeed, 'patience and caution are still needed' on the descent of inflation.

The members of the Governing Council meeting in Frankfurt on 6-7 March agreed on the need for policy to remain data-dependent. At the same time, the governors agreed that 'although it was wise to await incoming data and evidence, the case for considering a rate cut had strengthened', the minutes of the meeting published today show. This consideration, it explains, was based on the latest ECB expert projections, further progress on the three criteria specified by the Governing Council in 2023, smaller projection errors and a more balanced assessment of risk, "with the date for a first rate cut becoming more clearly visible".

At the March Governing Council meeting "it was emphasised that, in addition to the new macro projections by the ECB staff, the Governing Council will have much more data and information available by the June meeting, especially on wage developments. In contrast, the new information available in time for the April meeting would be much more limited, making it more difficult to have sufficient confidence about the sustainability of the disinflation process by then'.

Among the governors, doubts remained about the sustainability of the disinflationary process, particularly in services and domestic inflation, due to the uncertain outlook for wage growth, productivity growth and profit margins. In order to increase confidence in the sustainable return of inflation to target, it was deemed necessary for the incoming data to confirm the important assumptions and forecasts on these indicators contained in the March ECB expert projections.