The case for another interest rate cut by the European Central Bank (ECB) is gaining traction, according to ECB board member Piero Cipollone. This comes shortly after another influential policymaker expressed a similar view.
The ECB has reduced interest rates six times since June, but has offered limited guidance about its next steps following the latest cut in March, maintaining that it is up to the bank to navigate market uncertainties.
Cipollone noted that economic conditions have changed since the March meeting, with inflation potentially declining more rapidly than anticipated. He stated in an interview with Spanish newspaper Expansion that "key issues have arisen that have strengthened the arguments in favor of continuing to lower rates" and that the ECB is likely to achieve its inflation target sooner than previously projected.
The head of the Greek central bank echoed this sentiment last Friday, suggesting that current indicators point toward a rate cut in April.
Cipollone highlighted significant declines in energy prices since the March 6 meeting, an appreciation of the euro, and rising real rates—all contributing to a quicker reduction in inflation. He warned that if the United States were to impose tariffs on European exports, it could negatively impact demand, further exacerbating inflation's downward trend. He also pointed out that trade tensions between China and the United States may result in China redirecting its products to the European market, intensifying price pressures.
Financial markets estimate a roughly 60% chance of a rate cut in April, with a reduction by June fully priced in. Investors also anticipate another cut, likely in December, which would bring the ECB's deposit rate to 2% by the end of 2025.