In an interview published today, ECB Governing Council member Robert Holzmann indicated that while he is open to rate cut in June, “I see absolutely no reason for us to cut key interest rates too quickly, too strongly,” he said.

Holzmann also acknowledged the significant influence of Fed on ECB decision-making. He described the Fed as “the gorilla in the room,” emphasizing how ECB policies are, to some extent, shaped by actions taken by the US central bank, particularly due to the dollar’s pivotal role in the global economy.

Speaking in Frankfurt, ECB Governing Council member Pierre Wunsch indicated the even though the outlook remains “foggy”, he saw a “path for initiating rate cuts this year.” He added that the upcoming June meeting would provide clearer insights into wage and service sector dynamics for making the decision.

Wunsch further explained that there is “no sign of de-anchoring” regarding longer-term inflation expectations, which supports the argument the costs of remaining “tight for too long” seem to outweigh those of a “premature loosening”.

However, Wunsch also noted “significant risks” related to the path of wage growth and inflation in sectors with high labor costs. Therefore “now is not the time to commit to a preset course of action” he added.

Bundesbank President Joachim Nagel, a member of ECB Governing Council, cautioned about enduring inflationary challenges during a speech overnight. Nagel noted the confluence of factors, including supply chain resilience, impending labor shortages due to demographic shifts, and the green transition, all of which could exert upward pressure on prices.

“To improve resilience, some form of de-risking seems reasonable, especially in the case of strategically important goods,” Nagel said in a speech. “We should keep in mind that greater security for supply chains is likely to come with some additional price pressures.” These structural changes in the eurozone economy, Nagel argued, could sustain inflationary tendencies for an extended period.

Highlighting demographic trends, Nagel projected a significant annual decline of 80,000 individuals in the potential labor force starting from 2026. This demographic shift, he emphasized, could drive wage growth, thereby fueling inflationary pressures further.

Nagel reiterated the ECB’s commitment to price stability, emphasizing its mandate to curb inflationary pressures. “One thing is clear: Our mandate is price stability!” he said. “If there is more price pressure in the medium-term, we must take action against it… price stability is a prerequisite for an efficient adjustment process.”

ECB’s Chief Economist Philip Lane, in an interview with Spanish newspaper El Confidencial, expressed growing confidence regarding return of inflation to 2% target, thereby increasing the likelihood of an interest rate cut in June.

Lane cited recent data, and stated, “Both the April flash estimate for euro area inflation and the Q1 GDP number that came out improve my confidence that inflation should return to target in a timely manner.” Though, he emphasized the need for ongoing monitoring, acknowledging the influx of additional data between the interview date and June.

Lane downplayed the spillover effects of decisions made by Fed, stating, “The combined effects of decisions taken by the Federal Reserve would be ‘largely contained.'”

Furthermore, Lane underscored the importance of geopolitical developments, particularly in the Middle East. “We have to accept that we live in a world that is going to face a lot of geopolitical tensions over a number of years,” he said, recognizing the long-term reality of enduring geopolitical tensions.