June 8 (Reuters) – It is too early to know whether the European Central Bank has started a downward trend in borrowing costs after it cut its benchmark interest rate this week, head Robert Holzmann said on Saturday. of the entity’s economic policy.
The ECB cut the rate it pays on bank deposits to 3.75% on Thursday, from a record 4.0%, but stopped short of promising further easing after a series of disappointing data on wages and inflation in recent weeks. .
Holzmann, president of the Austrian central bank, was the only member of the ECB’s 26-member Governing Council to oppose lowering rates. The bank’s decision was widely expected.
Asked whether the rate cut marked a shift toward lower borrowing costs or was a step that did not commit the bank in a particular direction, Holzmann sounded cautious.
“I think it’s a step in the right direction,” he said. “I hope – I don’t know – that there is no need to raise rates again,” she added, stating that future decisions will depend on the data.
Among the factors to consider would be the rate differential between the ECB and the Federal Reserve, Holzmann said in the interview with local radio.
If, as Fed officials have hinted this year, the US central bank does not cut rates three times, that would affect exchange rates to the detriment of the euro against the dollar, which could stoke inflation in the currency zone. unique, he noted.
The ECB will only be able to declare victory over inflation once it has eased to the bank’s target of 2%, Holzmann said.
“We hope to achieve it in 2026,” he said. “That’s what the models predict. And all of this assuming that no new shocks occur.”
Euro zone annual inflation accelerated to 2.6% in May, from 2.4% in April, according to a preliminary estimate.
(Reporting by Dave Graham; Editing in Spanish by Javier Leira)
