(Reuters) – It’s too early to inform whether or not the European Central Financial institution has initiated a shift in direction of decrease borrowing prices after it reduce its benchmark rate of interest this week, ECB policymaker Robert Holzmann mentioned on Saturday.
The ECB reduce the speed it pays on financial institution deposits to three.75% from a document 4.0% on Thursday however held again from promising any extra easing after a string of disappointing wage and inflation knowledge in current weeks.
Holzmann, the pinnacle of Austria’s central financial institution, was the one member of the ECB’s 26-member Governing Council to oppose the speed reduce. The financial institution’s resolution had been broadly anticipated after the ECB had telegraphed its intentions forward of time.
Going ahead, the financial institution could be seeking to keep away from placing itself in any kind of bind, Holzmann instructed Austrian radio.
When requested whether or not the speed reduce marked a shift in direction of decrease borrowing prices, or was a step that didn’t commit the financial institution towards a selected course, Holzmann was cautious.
“I think it’s a step in the right direction,” he mentioned. “I hope – I don’t know – that there won’t be a need to raise rates again,” he added, saying future selections would rely upon knowledge.
Amongst elements to think about could be the speed differential between the ECB and its U.S. counterpart, the Federal Reserve, Holzmann mentioned within the interview.
If, as U.S. policymakers have intimated they might this 12 months, the Fed doesn’t reduce charges 3 times, that may have an effect on change charges to the euro’s detriment in opposition to the greenback, which might fan inflation within the single forex space, he famous.
The ECB might solely declare victory on inflation as soon as it had eased to the financial institution’s goal of two%, he mentioned.
“We hope we’ll be there in 2026,” Holzmann mentioned. “That’s what the models predict. And that’s all based on the assumption that there are no further shocks.”
Euro zone annual inflation accelerated to 2.6% in Might from 2.4% in April, based on a flash estimate.