Lane (ECB) says it is ready to start cutting interest rates, reports the FT

(Reuters) – Philip Lane of the European Central Bank said the ECB was ready to start cutting interest rates from next week, the Financial Times reported on Monday, ahead of its June 6 policy meeting .

“Barring any major surprises, at this stage there is enough in what we are seeing to remove the highest level of restriction,” Lane told the FT in an interview.

Lane said ECB policymakers needed to keep rates in restrictive territory this year to ensure inflation continues to slow and does not remain stuck above the bank’s target, which “would be very problematic and probably quite painful to remove.”

He added that the pace at which the central bank cuts euro zone borrowing costs this year would be determined by assessing the data to determine whether it was safe and proportionate.

The ECB all but promised to cut interest rates on June 6, but some analysts began to downgrade their forecasts for further cuts after stronger-than-expected wage data.

Negotiated wage growth in the eurozone accelerated slightly in the first quarter of 2024, strengthening the case for caution in cutting rates from record levels.

However, Lane said the “overall direction for wages still points toward deceleration, which is key.”

“The best way to frame the debate this year is that we still have to be restrictive throughout the year,” Lane said, adding, “But within the restrictive zone, we can go down somewhat.”

(Reporting by Jahnavi Nidumolu in Bengaluru; editing by Muralikumar Anantharaman and Shri Navaratnam)