ECB’s Schnabel calls for caution in rate cuts beyond June, Nikkei reports

TOKYO, May 17 (Reuters) – European Central Bank (ECB) board member Isabel Schnabel said the central bank may slash interest rates in June, but advocated caution about further cuts in borrowing costs given uncertainty over the outlook, Japan’s Nikkei newspaper reported.

The ECB left interest rates unchanged last month but made clear that its next move will be a cut, most likely on June 6, provided wage and inflation data stay on their current, relatively benign path.

“Depending on the incoming data and our new Eurosystem staff projections, a rate cut in June may be appropriate,” Schnabel said in an interview with Nikkei in Frankfurt that was posted on its website on Friday.

“But the path beyond June is much more uncertain. Recent data have confirmed that the last mile of disinflation is the most difficult,” she said.

After many years of “very high” inflation and with price risks still tilted to the upside, pushing forward the timing of rate cuts would risk easing monetary policy prematurely, she said.

“Further progress in inflation and especially domestic inflation, which is proving stickier, is needed to foster our confidence that inflation is going to sustainably return to our 2% target in 2025 at the latest,” Schnabel was quoted as saying.

Source: REUTER