FRANKFURT (Reuters) – The ECB must move “very slowly” in reducing interest rates because there is huge uncertainty over the inflation outlook, its vice-president Luis de Guindos said on Wednesday.
The European Central Bank cut its policy rate from a record high last week, despite higher inflation expectations for this year and next and misgivings by some governors.
De Guindos said he was confident inflation would eventually fall to the ECB’s 2% goal, but the next few months would be bumpy and high inflation in services warranted caution.
“The level of uncertainty is huge,” de Guindos told an event organised by Market News International. “That’s why, when you are in a dark room, you have to be very careful. You have to… move very slowly, to move with a lot of prudence.”
After committing to a June rate cut months in advance and being surprised by strong wages and inflation data, ECB President Christine Lagarde and her colleagues said they would now decide meeting by meeting depending on incoming data.
De Guindos said he could not predict if the ECB would cut rates again in the next few months, but he was confident borrowing costs would fall by the end of next year.
“The question mark, given the uncertainty,… is: ‘what kind of steps are we going to take over the next months?’,” De Guindos said, adding: “But if you ask me: ‘what’s the direction… before the end of 2025? I would say that the direction is clear.”
(Reporting by Balazs Koranyi; Writing by Francesco Canepa; Editing by Gareth Jones and Alexander Smith)
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