European Central Bank appearance.
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ECB board member Isabelle Schnabel warned against successive interest rate cuts amid lingering inflation risks, Nikkei report On Friday, the central bank prepared for its June meeting amid expectations of a rate cut.
Schnabel told Nikkei that while a rate cut in June may be justified based on incoming data and forecasts, beyond that the situation is less certain.
The European Central Bank kept interest rates at historically high levels for the fifth consecutive meeting last month, but is expected to cut rates to 3.75% from the current 4% at its next meeting.
“The path beyond June is even more uncertain. Recent data confirms that the last mile of deflation is the most difficult,” Schnabel said, adding that a rate cut in July does not seem justified.
The ECB board member added: “After years of very high inflation and with inflation risks still tilted to the upside, early easing carries the risk of premature easing.”
The euro zone’s core inflation rate fell to 2.7% from 2.9% in April. The ECB’s inflation target is 2%.
Schnabel pointed out that the market is still facing “very high uncertainty”, and he emphasized that market participants have moved from six rate cuts at the beginning of the year to the current pricing.
The ECB said in the report that geopolitical tensions and policy uncertainty brought about by a series of elections around the world this year also pose risks to the financial stability of the euro area. recent financial stability review.
However, the review highlighted improvements in financial stability.
“From today’s perspective, the near-term risks of a deep recession with rising unemployment – the main source of concern six months ago – are much lower,” ECB Vice President Luis de Guindos said in comments.
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