The first reduction in interest rates in the Eurozone may happen in June. This opinion was expressed by the head of the German Federal Bank (Bundesbank), Joachim Nagel, in an interview with the newspaper Handelsblatt.
„If the latest assessment from the ECB Governing Council is confirmed by the incoming data and our outlook for the future, we are likely to see the first rate cut in June,” Nagel said. “But even if interest rates are cut for the first time in June, this does not mean that we will continue to lower them at the next meetings of the Governing Council. “We are not on autopilot”, he stressed.
The head of the Bundesbank noted that there is still great uncertainty about future economic and price developments. “That is why we will make decisions from meeting to meeting. At this stage, I am happy with what we have achieved with our ten rate hikes and I think we may be ready for the initial rate cuts,” he said.
On inflation, Nagel noted that there may be months when inflation rises slightly because some prices tend to fluctuate, especially energy prices. “Overall, I expect inflation to continue to decline towards our 2% target and reach it in 2025. But we need to remain cautious,”, he warned. “We must not reduce interest rates too quickly and jeopardize what has been achieved”, concluded the head of the Bundesbank.
On April 11, the Governing Council of the European Central Bank decided to leave three key interest rates unchanged. Thus, the main interest rate remains at 4.5% per annum, the interest rate on deposits is 4%, on short-term loans of the ECB - 4.75%.