Introduction
The European Central Bank's Robert Holzmann believes there's no need for further interest rate cuts, citing stable economic growth and a decreasing inflation trend in the euro area.
Context
In an interview with Reuters, Holzmann noted that euro zone inflation, particularly in the important services sector, showed signs of easing last month.
Developments
This data has fueled market speculation about a sixth consecutive rate cut at the ECB's next meeting on April 16, which could lower the rate on bank deposits from 2.5% to 2.25%.
- Holzmann expressed caution regarding the ECB's recent rate cut in March, arguing that the economy does not require additional stimulation.
- "We had assumed inflation would come down," said the Austrian central bank governor.
- "As we are neutral and inflation is converging to target, there is no reason to become accommodative."
The ECB views the neutral rate, which neither constrains nor stimulates economic growth, to be between 1.75% and 2.25%. However, there remains significant uncertainty about the precise estimation of that rate in real time.
Consumer price growth in the 20 nations sharing the euro eased to 2.2% in March, just above the ECB's 2% target, down from 2.3% in February, thanks to a significant drop in energy costs and slowing service inflation.
Conclusion
In summary, Holzmann's comments reflect a cautious approach by the ECB towards interest rate adjustments, emphasizing that current economic indicators may not warrant further cuts.