The decline will occur if the economic forecasts for the coming months come true

The European Central Bank (ECB) may start cutting interest rates in June if inflation in the eurozone continues to decline. This was stated by the Governor of the Bank of Spain and a member of the ECB Governing Council, Pablo Hernandez de Kos, Reuters reports.

«If our macroeconomic forecasts come true in the coming months, it is quite normal that we will soon start cutting rates, and June may be a good date to start,» De Kos said in an interview with the Spanish El Periodico.

In March, the ECB kept borrowing costs at a record high. However, the institution announced significant progress in reducing inflation and began preliminary discussions on the issue of abandoning monetary policy tightening.

De Kos called the disagreements in the ECB Governing Council on interest rate cuts justified, but they are currently limited.

When asked whether we should expect three 25 basis point cuts this year, De Kos did not comment on a specific timeframe. However, he noted that market conditions are compatible with achieving the EU’s medium-term inflation target of 2%.

The ECB left all three key interest rates unchanged at its meeting on March 7. European Central Bank President Christine Lagarde said that the decision to cut them would most likely be made at the June meeting, not in April. She emphasized that there will be much more economic data coming soon, especially on wages and profits.

In the latest forecasts by the ECB staff, inflation in the euro area was revised downward, particularly for the current year, mainly reflecting a smaller contribution from energy prices. The institution expects inflation to average 2.3% in 2024, 2% in 2025, and 1.9% in 2026.

As GMK Center reported earlier, inflation in the eurozone grew by 2.6% y/y in February this year, slowing down compared to January, when the figure was 2.8%. The analysts surveyed by Trading Economics expected a more significant slowdown in consumer price growth, to 2.5%.