ECB Governing Council member Peter Kazimir indicated in a blog post that June is the “more probable” timing for the first rate cut. But he emphasized that the timing is “secondary” to the decision itself, and he remains open on this issue.

“The next move will be a cut, and it is within our reach,” he asserted, adding, “I am confident that the exact timing, whether in April or June, is secondary to the decision’s impact.”

“The latter seems more probable, but I will not jump to premature conclusions about the timing,” he added.

ECB Governing Council member Mario Centeno advocates to start cutting interest rates “sooner and more gradually”, as there are a lot of evidence that inflation is falling sustainably towards 2% target. He also argued that ECB doesn’t need to wait for May wage data before acting.

“We can react later and more strongly, or sooner and more gradually. I am completely in favour of gradualism scenarios, because we have to give economic agents time to adapt to our decisions,” he said in a Reuters interview.

This perspective underscores his preference for a steady, sustainable reduction in interest rates, proposing 25 basis-point steps as “a good metric”.

Centeno’s stance also diverges from some ECB policymakers who propose waiting for Q1 wage data in May, to assess the potential second round effects on inflation. He argues that ECB’s decisions should not be exclusively hinged on wage data. “Data-dependent is not wage-data dependent…we don’t need to wait for May wage data to get an idea about the inflation trajectory,” Centeno remarked.

ECB Vice President Luis de Guindos expressed cautiously optimistic view on the trajectory of inflation in Eurozone. But he also emphasized that the central bank is data-dependent regarding cutting interest rates, rather than time-dependent.

“There has been good news regarding the evolution of inflation, and that — sooner or later — will end up being reflected in the monetary policy,” he told Spain’s RNE radio.

However, he was clear about ECB’s stance being firmly grounded in data-driven decision-making. Guindos emphasized the absence of a fixed timetable for policy changes, stating, “We are going to be dependent on the data, we don’t have any kind of calendar, it will depend on the evolution of inflation.”

ECB Governing Council member Klaas Knot expressed confidence in inflation reverting to 2% target in 2025, but pointed out a crucial element that remains uncertain: the alignment of wage growth with this lower inflation expectation.

In an interview with the Dutch TV program Buitenhof on Sunday, Knot noted he “credible prospect” of it returning to the 2% target in 2025. However, “the only piece that’s missing is the conviction that wage growth will adapt to that lower inflation”.

Knot highlighted the current disparity between wage growth, at 5%, and the desirable rate of around 2.5% for sustainable price stability. He stressed that a gradual shift to this lower wage growth rate is essential for ECB to consider lowering interest rates.

He also anticipated “a couple of years” where wage growth may exceed inflation, “allowing a restoration of purchasing power,” However, he assured that this scenario would not hinder the trajectory towards the 2% inflation target.

Nevertheless, he suggested that this scenario wouldn’t necessarily impede the achievement of 2% inflation target. He argued that there’s sufficient leeway in profit margins to accommodate these higher salaries without triggering a significant secondary surge in prices. However, Knot cautioned that this is a “narrow path,” requiring careful navigation.

In the latest ECB Survey of Professional Forecasters for Q1 2024, inflation expectations have been revised downwards across all horizons. For the immediate years, headline HICP inflation is projected to decrease from 2.4% in 2024 to 2.0% in 2025 and 2026. These revised figures represent a downward adjustment of 0.3 percentage points for 2024 and a slight 0.1 percentage point decrease for 2025.

Similarly, core HICP inflation, which excludes volatile components like energy and food, has also been revised downward for 2024 to 2.6%, with a further reduction to 2.1% expected in 2025. By 2026, core inflation is projected to align with ECB’s target, reaching 2.0%. The revisions for 2024 and 2025, each marked by a 0.3 and 0.1 percentage point decrease respectively, reflect an anticipated easing in the underlying inflationary trends.

On the growth front, expectations for real GDP have been adjusted downward for both 2024 and 2025. The forecasters now anticipate GDP growth of 0.6% in 2024, followed by a modest recovery to 1.3% in 2025 and slightly higher growth of 1.4% in 2026. These projections, revised down by 0.3 and 0.2 percentage points for 2024 and 2025 respectively, indicate a cautious outlook on economic expansion in the near term.

Full ECB SPF results here.

ECB Governing Council members Boris Vujcic and Gediminas Simkus have underscored the importance of a cautious approach to future interest rate reductions. In separate interviews occasions, both officials emphasized the need for patience in evaluating economic data before committing to rate cuts.

Boris Vujcic highlighted the necessity of ensuring that inflation is “firmly sustainably on the way” towards ECB’s medium-term target. He emphasized a gradual approach, stressing that ECB should wait for sufficient data to validate a downward trajectory in inflation rates.

Vujcic also expressed a preference for rate cuts in increments of 25 basis points, though he did not exclude the possibility of larger steps if warranted by economic data.

Gediminas Simkus, on the other hand, indicated that a rate cut in March is unlikely. He suggested that the likelihood of rate reductions would increase as 2024 progresses, describing this increase as “exponential, not linear.” This statement implies a growing possibility of monetary easing later in the year, contingent upon evolving economic indicators.

ECB Governing Council member Martins Kazaks emphasized a cautious approach to reducing interest rates in an interview with BloombergTV. He acknowledged that while a downward adjustment in rates is anticipated, the ECB should not hasten this process, cautioning against premature actions that could potentially rekindle inflation.

Kazaks drew parallels to historical instances, particularly from the 1970s and 80s, to underline the risks associated with relaxing monetary policy too soon. “There’s the risk that inflation starts to come back and then one would need to raise rates much more,” he added.

Regarding, the timing and magnitude of easing cycles, he indicated that ECB could opt for either smaller steps initiated earlier or larger steps taken at a later stage. But Kazaks emphasized that would be “all data dependent”.

ECB left monetary policy unchanged as widely expected. Main refinancing, marginal lending and deposit rates are held at 4.50%, 4.75%, and 4.00% respectively.

In the accompanying statement, ECB noted that incoming information has “broadly confirmed its previous assessment of the medium-term inflation outlook. “Aside from an energy-related upward base effect”, the declining trend in underlying inflation “has continued.

The central bank also maintained that current interest rates, “maintained for a sufficiently long duration”, will make substantial contribution to bringing down inflation to target. Future policy decisions will follow a “data-dependent approach” to determine both the level of duration of monetary restriction.

Full ECB statement here.