At the European Central Bank's policy meeting on March 6-7, officials expressed growing confidence that inflation was moving towards the targeted 2 percent point. However, they also emphasised the need for caution and patience, as they believed there was still a strengthening case for a potential interest rate cut. This information was revealed in the meeting's minutes released on Thursday.
Though the team was hopeful, they also insisted on the need for more concrete data and evidence to ensure they had reached their set target. Assessing the situation, the team agreed that despite solid and robust conditions, the process of reducing inflation remained delicate. They believed this was largely contingent on multiple positive assumptions about wages, profits, and productivity.
Despite this, the policymakers expressed that risks of exceeding or falling short of the inflation target in the mid-term were moving towards a balance. Given recent comments from key policymakers, including President Christine Lagarde, market experts are anticipating an imminent rate cut by the ECB in June.
Figures released on Wednesday, which showed that headline inflation in the Eurozone had decreased to 2.4 percent in March from 2.6 percent in February, have strengthened these expectations. Moreover, the core inflation, excluding the volatile food and energy prices, fell more than anticipated to 2.9 percent in March from 3.1 percent in February.
The next ECB meeting is set for April 11, but according to ING economist Carsten Brzeski, a rate cut next week is highly improbable. Brzeski posits that given the current inflation levels, which are still above the target, and a high services inflation, the risk of reflation is too high to give it a green light. Brzeski suggests the likelihood of the ECB waiting until the June meeting instead when more data will be available, including new ECB staff forecasts, GDP growth, wage growth data for 2024's first quarter, and the results of the Bank Lending Survey.
