Source: Cai Lianshe Author: Xia Junxiong
Robert Holzmann, Governor of the Austrian National Bank, said that it is too early to determine whether the ECB will continue to cut interest rates despite the ECB's announcement of rate cuts this week. One of the factors to consider, according to Holzmann, is the interest rate differential between the ECB and the Federal Reserve.
Robert Holzmann, a member of the ECB committee and Governor of the Austrian National Bank, said that it is too early to determine whether the ECB will continue to cut interest rates despite the ECB's announcement of rate cuts this week.
The ECB announced a 25 basis point rate cut on Thursday, becoming the second central bank to ease monetary policy after the Bank of Canada. The ECB's three key interest rates, the refinancing rate, the marginal lending rate and the deposit facility rate, were reduced to 4.25%, 4.50% and 3.75% respectively.
Due to disappointing inflation data in the euro area in recent weeks, the ECB has not pledged to further cut interest rates. According to preliminary statistical data released by Eurostat, eurozone CPI rebounded from 2.4% in April to 2.6% YoY in May.
In fact, even with this week's rate cut, the ECB's internal consensus was not completely reached. Holzmann was the only member of the ECB's management committee to oppose rate cuts and is usually seen as the representative of the hawkish camp in the ECB's management committee.
In an interview with Austrian Radio, Holzmann emphasized that data-driven decision-making should be guided by data, explaining why he opposed interest rate cuts.
When asked if this rate cut meant that interest rates would further decline, Holzmann was cautious. He said that future policy decisions would depend on data.
Holzmann said that one of the factors to consider is the interest rate differential between the ECB and the Federal Reserve. He warned that if the Federal Reserve did not cut interest rates three times as U.S. policymakers hinted earlier this year, this would affect the exchange rate of the dollar against the euro and could exacerbate inflation in the euro area.
Although policy makers, including ECB President Lagarde, have repeatedly emphasized that the ECB will act based on economic data rather than the Fed's moves, Holzmann has publicly acknowledged several times that European policymakers must take into account the inflation situation in the United States and the Federal Reserve.
Holzmann said that the ECB can announce victory only when the inflation rate falls to the target level of 2%. He added: "We hope to get there by 2026, which is the result of the model's prediction, and all this is based on the assumption that there will be no further shocks."
Editor/Lambor