ECB's Luis de Guindos Signals June Rate Cut: What's in Store for Markets?


The European Central Bank has emphasized the potential for interest rate reductions in June. However, Vice-President of the European Central Bank Luis de Guindos also indicated that decisions beyond this period are still uncertain, as stated on Thursday.

Discussions within the ECB last week revolved around the possibility of a rate decrease in June. Despite recent developments such as increased oil prices, a softened euro, and expectations of a delay in rate cut decisions by the US Federal Reserve, the forecast for a June rate cut has gained further traction.

"I think that we have been crystal clear: if things continue as they have been evolving lately, in June we'll be ready to reduce the restriction of our monetary policy stance," Luis de Guindos said on Thursday.

He repeated the ECB's projections that inflation, recorded at 2.4% in March, is anticipated to remain proximate to present levels in the forthcoming months. However, it is expected to regress to the ECB's targeted 2% by the following year.

Currently, markets are predicting a reduction of 75 basis points in the central bank's deposit rate within the year, equating to two complete adjustments post-June.

That being said, De Guindos refrained from making anticipations regarding forthcoming rate adjustments, despite some policymakers suggesting the prospect of a potential second cut in July. "When we say (we go) meeting by meeting, it can be at each following meeting," Villeroy told CNBC. "I don't think, for example, that we should concentrate our rate decisions solely on the quarterly meetings when we have a new forecast."

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