ECB’s Vasle cautions against premature rate cut expectations

ECB Governing Council member Bostjan Vasle expressed skepticism about market expectations for imminent interest rate cuts, considering them “premature,” both in terms of timing and the overall scope of such moves. This perspective challenges the market’s anticipation of monetary easing, which currently sees 50-50 chance of a rate cut by March, with a full cut expected by April

Vasle emphasized that the current market pricing “has lowered the level of restriction”. Additionally, the accommodation priced into by interest rate expectations seems to be at odds with the monetary stance required to steer inflation back to the target.

Additionally, Vasle indicated that ECB would likely wait until at least the end of Q1 before considering any changes to its stance. This approach is grounded in the need for more comprehensive data, which will only be available around March or April. he added, “We will need to understand the underlying trends better, and we need the new projections, too.”

On the inflation front, Vasle posited that inflation could rebound at the year’s turn, potentially hovering between 2.5% to 3% through the first half of the next year. Vasle said, “So it’s appropriate to wait and observe price growth through this period and reassess our outlook.”