During a conference today, ECB Executive Board member Piero Cipollone emphasized the importance of incoming data in the months of June and July in shaping ECB’s approach to ease its current restrictive measures.

“If we see that the incoming data…will confirm our confidence that inflation is really (moving) to target, it will be appropriate to remove some of the restriction that we put in place,” he stated.

However, Cipollone also expressed concerns regarding the volatility in the commodity markets, particularly the price of oil, which poses a significant risk to inflation. As Eurozone is a large, open economy with substantial dependence on energy imports, fluctuations in oil prices remain a major concern for ECB.

In an interview with CNBC today, ECB President Christine Lagarde expressed cautious optimism about the ongoing disinflationary trends, noting that disinflation is aligning with ECB’s forecasts.

Lagarde emphasized the need for ECB to gain “a bit more confidence” in the sustainability of these disinflationary trends before making any significant changes to its policy framework.

Looking ahead, Lagarde pointed out that barring any “major shock” in developments, ECB is poised to “moderate the restrictive monetary policy.”

ECB Governing Council member Olli Rehn highlighted in a statement that reduction in policy restrictions could commence in June as long as “inflation continues to fall as projected.”

But he also addressed the predominant risks, identifying “geopolitics” as the primary source of uncertainty. He specifically pointed to the “deteriorating situation in Ukraine” and the “possible escalation of the Middle East conflict” as critical factors with potential ramifications on the European economy, especially concerning energy prices and overall economic stability.

Looking ahead to ECB’s June meeting, the council will review an “updated assessment of the inflation outlook, the dynamics of underlying inflation, and the strength of monetary policy transmission.”

This upcoming analysis will be crucial in determining whether ECB has sufficient confidence that inflation is sustainably converging towards its target, leading to a decision to “start to ease the stance of monetary policy and cut interest rates.”

However, Rehn cautioned that this prospective easing is conditional on the absence of “further setbacks, for instance in the geopolitical situation and therefore in energy prices.”

ECB Chief Economist Philip Lane described disinflation process as “necessarily bumpy” at the current phase. In a speech, he pointed out that headline inflation is expected to “fluctuate around current levels in the near term,” influenced by base effects in energy sector and recent reversal of service inflation spikes caused by the early timing of Easter.

Meanwhile, Lane noting that while wage pressures are “gradually moderating,” they remain above what would be considered normal or steady-state levels. He emphasized that achieving ECB’s inflation target involves not just controlling wage growth but also managing profit margins across the economy.

Looking ahead to June Governing Council meeting, Lane indicated that ECB’s decisions would be informed by “updated staff projections” and comprehensive data on wage and profit dynamics from the early months of the year. He suggested that if these updated assessments and data provide stronger confidence that inflation is converging to ECB’s targets, it could be “appropriate to reduce the current level of monetary policy restriction.”

Full speech of ECB Lane here.