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ECB
President Christine Lagarde earlier this month said the bank was
just beginning to discuss whether to dial back interest rates
given a comforting fall in inflation and policymakers on both
the hawkish and dovish side of the spectrum have endorsed that
timeline.
Market investors are somewhat skeptical, however, and a cut is
fully priced in only by July as concerns are growing that the
U.S. Federal Reserve could delay its initial move and the ECB
would be hesitant to move on its own.
"We haven’t yet discussed anything about future rate moves," de
Guindos told Greek newspaper Naftemporiki in an interview. "We
need to gather more information. In June we will also have our
new projections and we will be ready to discuss this."
Among the 26 members of the Governing Council, the central bank
governors of Spain, the Netherlands, Ireland, Greece and
Slovakia have all publicly backed June while ECB chief economist
Philip Lane backed a second quarter move, arguing that the ECB
would have a "lot more" information by June.
De Guindos said the biggest risk to such a timeline was the
combination of rapid wage growth and poor productivity.
"These two factors together could lead to a significant increase
in unit labor costs," he said. "And this is a risk, especially
for services inflation, because services are labor intensive and
shielded from foreign competition."
(Reporting by Balazs Koranyi; Editing by Muralikumar
Anantharaman and Kim Coghill)
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