The ECB Governing Council agreed that monetary policy remains restrictive and emphasized that it is still too early to discuss the timing of interest rate cuts, according to the minutes of their latest meeting.
Eurozone rates remain restrictive: ECB minutes
Policymakers acknowledged that while inflation has been easing, the central bank must remain cautious in its approach to monetary easing to avoid any premature policy shifts that could reignite price pressures.
A selected group of council members expressed concerns over persistent services inflation and rising energy costs, warning that these factors could continue to pose inflationary risks. However, others were more worried about sluggish economic growth, arguing that overly restrictive monetary policy could lead to the ECB falling short of its 2% inflation target in the long run. This divergence of views highlights the challenge of balancing the need to support economic activity while ensuring inflation remains under control.
Disinflation process remains on track
Despite these differences, the council broadly agreed that the disinflation process remains on track and that risks to growth are still tilted to the downside. This aligns with market expectations that multiple rate cuts will likely be implemented later this year to support the eurozone economy.
At its January 25 meeting, the ECB followed through on expectations by lowering its key interest rates by 25 basis points, marking a step toward monetary easing. Looking ahead, investors will closely watch upcoming economic data releases, including inflation and GDP growth figures, for further indications of when the central bank might consider further rate cuts. ECB President Christine Lagarde and other policymakers have reiterated their data-dependent stance, reinforcing the idea that any policy adjustments will be carefully calibrated based on evolving economic conditions.
