ECB’s Holzmann Says September Cut Isn’t ‘Foregone Conclusion’
(Bloomberg) -- European Central Bank Governing Council member Robert Holzmann warned that interest rates won’t necessarily be lowered next month — despite several of his colleagues signaling a cut.
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“As always, I keep my reservations until the day of decision, and we’ll have a number of data coming in,” the hawkish Austrian central bank chief said at the Federal Reserve’s annual conference in Jackson Hole.
“So I wouldn’t say it is a foregone conclusion — definitely some of my colleagues are thinking this,” he told Bloomberg Television on Friday. “I think we have to look more carefully at the data. I hope we can do it, I am not against cutting, only I am afraid that I don’t want to cut too early.”
Investors expect the ECB to announce a rate reduction when it meets in three weeks, though officials beyond Holzmann stress that the decision hinges on data they’ll receive in the meantime. For some, the growing weakness in Europe’s economy — particularly in Germany — is making another cut more likely.
While figures Thursday showed a surprise drop in euro-area consumer sentiment, S&P’s Purchasing Managers’ Index revealed a sizable — if temporary — boost from the Olympic Games in Paris. Elsewhere, policymakers will have been relieved to see negotiated wage gains moderate, buoying efforts to hit 2% inflation in 2025.
Holzmann, however — who was the sole dissenter against the ECB’s first rate cut in June — said that target may not be met sustainably until 2026 or even 2027.
“For some, the impression is widespread that the fight is won,” he said. “To a large extent it probably is, but definitely there are some areas where inflation is still lingering, and these are the ones that can become dangerous.”
Backing the case for loosening is the start of monetary easing by the Federal Reserve, according to Holzmann.
“A decision will also be influenced by what the Fed is doing,” he said. Rate cuts that reduce the gap euro-area and dollar borrowing costs “would make it easier, but we have to look at our inflation drivers and they may be different and they are different from the US.”
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