ECB’s Holzmann: No fundamental objection to rate cut in Jun

In an interview with Reuters, ECB Governing Council member Robert Holzmann said that an interest rate cut in April is “not on my radar”. Instead, he highlighted June as a critical time for evaluating the bank’s next steps, emphasizing a commitment to data-driven decision-making regarding monetary easing.

“If the data allows it, a decision will be made,” he noted. “I don’t have an in-principle objection to easing in June, but I’d like to see the data first and I want to stay data-dependent.”

An intriguing aspect of Holzmann’s perspective is his consideration of Fed’s actions in relation to ECB’s. He mentioned, “If by June the data supports a strong case for a cut, and we’re a week before the Fed makes its decision, then it’s quite likely we’ll proceed, hoping the Fed follows suit.” However, if Fed doesn’t come along, “then it may reduce the economic impact of our move.”

Notably, Holzmann’s remarks signal a significant shift, especially considering his reputation as one of the more conservative voices within ECB, typically resistant to premature discussions of rate reductions. For him, the shift appears to be influenced by an increasingly benign inflation outlook. Also there were signs of economic fragility within Eurozone, which has been hovering on the brink of recession for multiple quarters.