ECB Caution on Interest Rate Cuts

BERLIN (Reuters) – The European Central Bank should proceed with caution on further interest rate cuts as inflation has not yet been overcome, said Austrian central bank Governor Robert Holzmann in a recent interview with the Sueddeutsche Zeitung.

“Inflation is on the right track. But it has not been defeated,” Holzmann remarked. He believed the last interest rate cut was appropriate, but this does not imply that further cuts will automatically follow.

Holzmann stood alone in opposing the ECB’s June rate cut among the 26-member Governing Council.

He highlighted that when examining more significant measures, such as core inflation – excluding the fluctuating prices of energy and food – the situation appears less optimistic.

In September, euro zone headline inflation fell below 2% for the first time since mid-2021, strengthening arguments for an ECB rate cut this month as a three-year effort to control rampant price increases seems to be reaching a conclusion.

Nonetheless, underlying prices remain at 2.7%, down from 2.8%.