Chief Economist Lane believes the case for an ECB rate cut is gaining strength

The European Central Bank (ECB) is considering an interest rate cut in June as services inflation begins to ease, according to ECB Chief Economist Philip Lane. In an interview with Spanish newspaper El Confidencial, Lane stated that recent data, including the April flash estimate for euro area inflation and first-quarter GDP numbers, have boosted his confidence that inflation will return to the ECB’s 2% target.

The ECB has hinted at a rate cut on June 6, pending further data that supports policymakers’ belief in reaching the inflation target by mid-next year. Lane emphasized the importance of upcoming data releases in the weeks ahead to inform the decision-making process.

Investors are already pricing in a rate cut for June, but uncertainties remain about future moves, especially after the U.S. Federal Reserve hinted at a possible delay in its own policy easing. The widening interest rate gap between major central banks could impact the euro and European inflation, influencing the ECB’s decision-making.

While April inflation data showed progress in services prices, Lane stressed the need to monitor services to prevent disinflation in the future. Overall inflation currently stands at 2.4%, with expectations of fluctuation throughout the year before a decline in 2025.

The ECB’s decision on interest rates will have significant implications for the European economy and global markets. Stay tuned for updates as the ECB continues to assess the economic landscape and inflation outlook.