2024-08-23 15:22:30
The European Central Bank’s Governing Council (ECB) does not see a need to cut key rates now, but has hinted at a new discussion in September as high interest rates weigh on growth. This was reported by Reuters, referring to the minutes published today of the meeting to determine the monetary policy of the institution held on July 17 and 18.
The ECB then left interest rates unchanged and gave little hint of future action, but the minutes revealed concerns about a severe curb on economic growth and showed reassurance that bringing eurozone inflation down to the 2 percent target is on track.
“The gradual easing of restrictive policy was a balancing act, as it was also important not to unduly harm the economy by keeping interest rates at a restrictive level for too long,” the minutes said, adding that it was important to monitors the real economy.
“The September meeting is widely seen as an opportune time to reassess the constraints of monetary policy,” the ECB added.
The ECB was among the first major central banks to cut rates in June, and economic data from the eurozone over the past six weeks has largely supported the case for further easing.
Growth in collectively bargained wages, a key gauge of future price pressures, slowed sharply in the second quarter, and economic growth was weak. This is due to the fact that Germany, which is the largest economy in the Eurozone, managed to avoid recession.
Markets now see a more than 90 percent chance of a 25 basis point (0.25 percentage point) rate cut next month, followed by at least one more step this year, which could happen in December.
“While there may still be surprises in terms of collective wage growth over the year, today’s reading of the pace makes a 25 basis point cut in September even more likely,” ING economist Burt said. Colleen.
The ECB has long been concerned about the rapid increase in remuneration, but the minutes report a reassurance among decision-makers in the financial institution, writes BTA.
“It is reassuring to see that domestic spending pressures caused by high growth in collective bargaining wages, including in the services sector, are increasingly being buffered by corporate profits,” the minutes said.
The ECB Board also believes that inflation in the euro area is on track to return to the target level of 2 percent (so-called “disinflation” – a weakening of price growth) by the end of next year.