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.
