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4mo ago

ECB Policymakers Split on Next Steps After Seventh Rate Cut to 2.25%

Debate intensifies as Olli Rehn suggests larger cuts in June if inflation weakens, while Robert Holzmann urges caution over unresolved tariff uncertainties.

Dark clouds are seen over the building of the European Central Bank (ECB) before the ECB's monetary policy meeting in Frankfurt, Germany, June 6, 2024. REUTERS/Wolfgang Rattay
Philip R. Lane Chief Economist, European Central Bank talks to Balazs Koranyi, Chief Correspondent, Reuters (not pictured) at the London Stock Exchange, London, Britain, June 17, 2024. REUTERS/Anna Gordon
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Overview

  • The European Central Bank reduced its key interest rate to 2.25% in April, marking the seventh consecutive cut since mid-2024.
  • Olli Rehn, a Governing Council member, indicated potential for larger rate cuts in June if inflation projections fall below the ECB's 2% target.
  • Robert Holzmann, another ECB policymaker, advocates delaying further cuts until there is more clarity on U.S. tariff policies and European Union responses.
  • Chief Economist Philip Lane ruled out bond purchases or other extraordinary measures, emphasizing the ECB still has room to adjust rates further.
  • Market expectations suggest at least one more 25-basis-point rate cut in June, with a possibility of another by the end of 2025.