Former ECB President Jean-Claude Trichet on prospect of rate cuts in Europe
The European Central Bank is likely to look past recent “bad news” on inflation to cut interest rates in June, but may only opt for one more reduction this year, Jean-Claude Trichet, former European Central Bank president, told CNBC’s “Squawk on the Street” on Tuesday.
“My intuition is that they will pull the trigger and decrease rates by point 25 percent, even if there has been some bad news… as regards the goal, which is to stabilize prices and having inflation going down,” Trichet said.
Bad news includes the recent upticks in headline inflation, core inflation and services inflation, and negotiated wages picking up in the first quarter of the year.
The good news is that euro zone unemployment is at an all-time low and purchasing managers’ index figures indicate an ongoing economic recovery, he added.
“We must accept that data could [change] month-on-month or quarter-to-quarter so we must be prudent… based on current data, instead of thinking [the ECB] would decrease [interest rates] twice after June, it is more reasonable to think of one decrease of rates,” Trichet said.
“But again this is my central intuition, it can change. We could have a lot of better news as regards inflation and we could have even more bad news,” he added.
— Jenni Reid
European Central Bank won’t deliver back-to-back rate cuts but has plenty of scope to ease, economist says
Azad Zangana, senior European economist and strategist at Schroders, told CNBC on Tuesday he sees the ECB following through with its June cut, and then opting for reductions at alternate meetings for the rest of the year.
That would mean a total of three cuts implemented this year, with follow-ups in September and December, in line with the forecast in a recent Reuters poll of economists.
— Jenni Reid