ECB chief economist Philip Lane said current monetary policy package has been “effective”. And, “the effectiveness of the policy toolkit means that we can add further monetary accommodation.” He added “further easing can be provided if required to deliver our mandate.”

He also noted “especially when inflation deviates from its objective for an extended period, central banks ‒ including the ECB ‒ should adopt clear communication strategies that leave no doubt about their absolute commitment to meeting the inflation objective over the medium term.”

ECB Governing Council member Ardo Hansson urged not to read too much in to the weaker than expected Q3 GDP figure (0.2% qoq released yesterday). He said, “these were preliminary numbers, maybe they were a bit slower than some expected.” And, “we have to wait and see what was behind this.” Also, he said “as there have been no significant, material change in one way or the other I would not make major conclusions” regarding monetary policy or economic outlook. He also emphasized the need to look at ECB’s own staff projections to be updated in December instead.

Separately, Daniele Nouy, chair of the Supervisory Board of the ECB, said that Eurozone has “reduced risks enough for the European Deposit Insurance Scheme to start.”. And it’s the right time to set it up and “consider some solidarity”. Nouy also added creating cross border consolidation in the banking said can be a solution to the top risks of low profitability. She said “such cross-border mergers would also create a few large European banks – let us call them `European champions’ – which could then successfully compete on the global stage.”

ECB Governing Council member Yannis Stournara, a known dove, proposed two rate reductions “before the summer break” and a total of four throughout the year. This strategy, he argues, is essential to ensure that ECB’s monetary policy “does not become too restrictive” in the face of current economic challenges.

In an interview, Stournaras emphasizes the urgency of beginning these rate cuts soon, but not in April, as there will be “only little new information” available before then.

The rationale behind Stournaras’s push for rate cuts stems from his observations on Eurozone’s economy is “much weaker than expected,” with risks skewed to the downside. Meanwhile, inflation, although significantly reduced, presents a balanced risk profile.

Addressing concerns about risk of “wage-price spiral,” Stournaras argued that wages are merely “catching up, not leading inflation.” He also highlights the moderating trend in nominal wage growth and the capacity of profits to absorb part of the pay increases, suggesting that fears of a wage-driven inflationary loop may be overstated.

Looking ahead, Stournaras envisions the deposit rate gradually decreasing to 2% by the end of 2025 or the beginning of 2026. However, he draws a line at this level, suggesting that rates should not fall below the pre-pandemic levels of 2%.

ECB Governing Council member Klaas Knot told reporter today that he has “pencilled in June for a first rate cut”. After that, Know said the subsequent path would be “data-dependent”.

Highlighting the significance of ECB’s meetings in September and December, which will include new economic projections, Knot positions these gatherings as crucial junctures for assessing and adjusting the bank’s monetary policy strategy.

Moreover, Knot opens the door for action outside the traditional schedule of projection-inclusive meetings. “But if incoming data tells us we can do more, the interim meetings should also be available,” he stated.