ECB Governing Council member Klaas Knot told reporter today that he has “pencilled in June for a first rate cut”. After that, Know said the subsequent path would be “data-dependent”.

Highlighting the significance of ECB’s meetings in September and December, which will include new economic projections, Knot positions these gatherings as crucial junctures for assessing and adjusting the bank’s monetary policy strategy.

Moreover, Knot opens the door for action outside the traditional schedule of projection-inclusive meetings. “But if incoming data tells us we can do more, the interim meetings should also be available,” he stated.

ECB Governing Council member Yannis Stournara, a known dove, proposed two rate reductions “before the summer break” and a total of four throughout the year. This strategy, he argues, is essential to ensure that ECB’s monetary policy “does not become too restrictive” in the face of current economic challenges.

In an interview, Stournaras emphasizes the urgency of beginning these rate cuts soon, but not in April, as there will be “only little new information” available before then.

The rationale behind Stournaras’s push for rate cuts stems from his observations on Eurozone’s economy is “much weaker than expected,” with risks skewed to the downside. Meanwhile, inflation, although significantly reduced, presents a balanced risk profile.

Addressing concerns about risk of “wage-price spiral,” Stournaras argued that wages are merely “catching up, not leading inflation.” He also highlights the moderating trend in nominal wage growth and the capacity of profits to absorb part of the pay increases, suggesting that fears of a wage-driven inflationary loop may be overstated.

Looking ahead, Stournaras envisions the deposit rate gradually decreasing to 2% by the end of 2025 or the beginning of 2026. However, he draws a line at this level, suggesting that rates should not fall below the pre-pandemic levels of 2%.

ECB Governing Council member Martins Kazaks likened the fight against inflation to battling a dragon, stating in a blog post, “The dragon of inflation is pinned to the ground, a little more and it will be defeated.” This vivid metaphor reflects a growing confidence within ECB that the persistent inflationary pressures which have challenged Eurozone economy are finally coming under control.

Kazaks further suggested that “if the economy roughly follows” the bank’s forecasts, “then the decision to start reducing interest rates could be made within the next few meetings.”

Kazaks also acknowledged the delicate balance the ECB has had to maintain: the risk of premature rate cuts that could reignite inflation versus the risk of delaying rate reductions too long. However, he noted that these risks are now beginning to “level out,” there is “no need to delay the rate reduction too much”

Complementing Kazaks’s insights, ECB Governing Council member Francois Villeroy de Galhau told France Info radio, “We will probably cut rates in spring, and spring in Europe is from April to June 21.”

“It’s perhaps more probable in June — we are very pragmatic and will see depending on the data,” Villeroy added.

ECB Governing Council member Pierre Wunsch emphasized the need for proactive stance on interest rates, acting on the fact that “inflation has gone down, is moving in the right direction”.

Speaking at a news conference for the Belgian national bank’s annual report, Wunsch candidly expressed that ECB is nearing a point where it must “make a bet” on cutting interest rates.

However, he was quick to temper expectations, noting that any decision to cut rates would be made carefully, with a keen eye on the persisting challenges of “service inflation and wage developments”, which are “still running at levels that are ultimately not compatible with our objective”

Despite these concerns, Wunsch indicated that ECB would not delay rate cuts until wage growth falls to 3%.

In an interview with Le Figaro, ECB Governing Council member Francois Villeroy de Galhau revealed a “very broad agreement” within the council to initiate rate cuts in spring, with lasts until end of June.

Villeroy, who also serves as Governor of Bank of France, expressed optimism that “we’re winning the battle against inflation”. The bank lowered core inflation forecast for 2024 from 2.8% to 2.4%. This revision aligns with more moderate wage increases, with average salaries expected to rise by 3.2%, down from the previously predicted 4.1%.

On the growth front, Bank of France downgraded its 2024 growth projections slightly from 0.9% to 0.8%, with expectations for an acceleration to 1.5% in 2025 and 1.7% in 2026. Villeroy confidently stated, “France will avoid recession.”