Rate cuts depend on March outlook – ECB official

The European Central Bank (ECB) rate cuts will depend on the new outlook for inflation and economic growth, set to be released in March, according to Governing Council member Pablo Hernandez de Cos, as reported by Bloomberg on Sunday.

De Cos, the head of Spain’s central bank, stated that the projections are crucial to help determine two things: firstly, if there is enough confidence that the 2 per cent medium-term target can be met considering the risks involved, and secondly, the interest rate trajectory that would align with achieving their symmetric target.

Officials from the ECB are considering the summer for the first easing of monetary policy.

Chief Economist Philip Lane mentioned on Thursday that the March predictions would offer a chance to thoroughly update their medium-term inflation outlook.

De Cos admitted to initially underestimating the price surge that resulted from the pandemic and Russia’s invasion of Ukraine.

However, he noted that the accuracy of staff forecasts has significantly improved, pointing out that recent forecast errors have been minimal and even negative, indicating that actual inflation rates have been slightly lower than predicted.

Regarding the economies of the 20 countries, de Cos observed that disinflation is already significantly underway, and he expects this trend to persist in the upcoming quarters.