After the European Central Bank cut interest rates for the third time this year – with inflation below target – all eyes are on policymakers’ next steps.
At this week’s International Monetary Fund Annual Meeting in Washington, D.C., a number of Governing Board members spoke to CNBC’s Karen Tso. We asked them about the outlook for inflation, the likelihood of a big 50 basis point rate cut in December and more.
Mārtiņš Kazāks, Bank of Latvia
Cut rates by 50 basis points: “Well, given what the data tells us, everything should be on the table. But we will have discussions in December, we will have discussions early next year, from meeting to meeting… with us Together we are approaching the 2% target, with rates falling as the economy is quite weak for rates 3.25we are still within considerable constraints.
“So, easing the pressure on interest rates is certainly what we need to do and that’s what we will do. But, of course, you know, we need to see the data… both the 0% situation and the 0% situation.” Cut interest rates, A 25 basis point cut, you know, and maybe a bigger cut, but it all depends on the data.
Pierre Wunsch, National Bank of Belgium
“Well, if you say you rely on data, you rely on data. I don’t want to predict what the data will tell us. Indeed, there may be discussions about whether we need to lift restrictions faster. We think that, or not, that depends Data, so I think it’s only reasonable if we have the data, you know, that inflation will come down.
“…I’m not ruling anything out, but we’re cutting rates very early. I think it would be great if we could… be gradual and not create unnecessary volatility in the market.” .
Mario Centeno, Bank of Portugal
“The data will speak for itself, but the reality is that September’s inflation numbers were very low, well below our expectations. That’s true for the title, but also true for the core. So we have converged, with medium-term inflation as close to 2% as possible, and we need to incorporate that into our story.
“Then we need to look at the data that’s coming in and the trends in the data that we’ve been watching. Of course, 50 basis points could be on the table because we’re still relying on the data and the data we’re getting is pointing in that direction.”
Claes Nott, Dutch Central Bank
“Are we at risk of structurally falling below our inflation target? I don’t think so. why not? Well, look at the salaries. Wage growth remains twice as fast as would be consistent with a return to the 2% inflation target and 0.5% productivity growth.
“Unfortunately, we don’t have higher productivity growth in the euro area, so as long as wages remain at higher levels, yes, there may be temporary shortfalls below our target, but I don’t think there is a structural, long-term undershoot.” is very important.
“1.7 (September inflation print) is a temporary phenomenon. This is entirely due to fundamental effects, and it may disappear from the data again in the coming months. So we do have a medium-term direction for our policy and that statement (on returning inflation to 2%) is designed to ensure that, yes, over the medium term we are committed and committed to bringing inflation back to 2% to our target of 2%.
Robert Holzmann, Austrian National Bank
“I’m sure some of my colleagues will demand deep cuts, while others won’t. For my part, I would say I would look at the data.
“If things are as bad as some are claiming, we could cut another 25 basis points, (but) 50? My current data would say, no.”
Joachim Nagel, Bundesbank
Regarding interest rate cuts: “The talk of 25 or something that might be different is not helpful. We live in a very uncertain environment, so we have to wait for new data and then we have to make a decision.
“We did what we did (at the October meeting), which was based on the way we have conducted monetary policy in the past, so we remained flexible in all directions.”
Regarding inflation: “I think we shouldn’t get too complacent here. There’s (below target) The data for September…maybe the data for October, November, December that will be released soon also have some possibility of going in the other direction. So, as I said, we should maintain a flexible, data-dependent approach, which I think is the best strategy that’s really worked over the last two and a half years.
François Villeroy de Gachau, Bank of France
Regarding inflation: “Victory is in sight, but we should not be complacent.”
On the possibility of a soft landing for the economy: “I think we can have a level of confidence. Remember, two years ago there were a lot of worries on both sides of the Atlantic that we were going to be in recession, and that the so-called sacrifice rate, the cost of growth getting back to the inflation target, was not the case. in this way.
“I think the credibility of our path played a big role because we were credible and inflation expectations remained firmly anchored, so interest rates during the last period of deflation were much lower than they were 50 years ago. Volcker incident.
Olli Rehn, Bank of Finland
About the economy: “I think there’s good news and bad news coming out of Europe. The good news is that deflation is on track. That’s important. It’s raising real incomes for our families and our citizens. Also, overall, employment is still pretty strong. On the other hand, we see weaker growth prospects, and we think productivity growth is Europe’s Achilles’ heel, so that was a factor in our decision last week to cut interest rates by 25 basis points in Europe. We see weaker growth prospects, which is also a factor. Increased deflationary pressures.
Regarding interest rate cuts: “The direction is clear. We are continuing the rate-cutting cycle. The speed and scale of rate cuts depend on the incoming data. We are particularly concerned about three factors, three variables in this regard. First, inflation output; second, underlying inflation , which is the neutralization of energy and food prices; third, the strength of monetary policy transmission, which to me is certainly not data dependent of any kind.
Gediminas simkus, Bank of Lithuania
Regarding interest rate cuts: “We’re clearly moving in the direction of looser monetary policy. Well, at this point, I can say unequivocally that in the upcoming meeting… (we’re) definitely going to see some cuts. But, what are the cuts? How big a cut, or whether it will be cut, will depend on the data we have at the time we make the decision.
“…I don’t think these super cuts are, you know, justified in some way unless we see, we clearly see, we do see some unexpected, Bad and expected stuff.
Boris Vujčić, National Bank of Croatia
About the economy: “Well, in Europe, things don’t look as good as they did six months ago or three months ago. Indeed, the current PMIs in particular are showing a slowdown. I’m afraid a lot of it, part of it is structural. …..Of course we are lowering interest rates now, which will help the cyclical part…but the structural issues have to be addressed in ().
Regarding interest rate cuts: “I’m completely open to any discussion in December. Personally, I don’t know what the decision will be, and I don’t think we should know now, because if we rely on data, we should wait, we don’t now Should be talking about about 25 (basis points) to 50, or possibly a pause in December, anything could happen depending on the incoming data.
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