Several central bank officials said the board remained cautious and did not want to hastily ease monetary policy in case inflationary pressures had not fully eased. Inflation in the services sector has remained stubbornly at 4 percent for the past few months, and geopolitical risks, such as conflict in the Middle East, could have sudden and large economic ramifications.
There is still debate among European policymakers over how many rate cuts there could be and how big. The IMF recommended that the ECB cut rates quarterly in quarter-point increments through September 2025, which would take the deposit rate to 2.5 percent, from 4 percent.
Investors are also betting that the ECB will cut rates three times this year: at meetings in June, September and December, when the central bank releases new quarterly projections on the economy and inflation.
“I have no major objections to what the markets have been pricing in recently,” said Martins Kazaks, governor of Latvia’s central bank. While quarterly forecasts are important, decisions can be made in meetings without them, he said.
“What is happening in the United States in terms of inflationary rigidity, of course, raises some more questions, but, in my opinion, disinflation continues,” he added. Unless “something dramatic happens,” the ECB is on track to cut rates in June, he added.
Mario Centeno, governor of Portugal’s central bank, said the magnitude of a rate move was “an open question.”
“I’d rather small moves than big moves and then stop” because it sends a clearer message to investors and is more conservative in the face of economic uncertainty, he said. “But there’s nothing stopping us from moving faster at first and then slowing down..”