It seems almost certain that there will be an interest rate drop next week after two influential European Central Bank members on Monday threw their support behind the idea.

Olli Rehn, the director of Finland’s central bank and a member of the ECB governing council, emphasised in a speech on Monday that inflation in the euro area was declining in a “sustained way.”

Although there was a little increase in inflation in December, the euro area’s inflation rate remained stable at 2.4% in April, its lowest level in seven months. On Friday, the May statistics are due.

“Thanks to this disinflationary process, inflation is converging to our 2% target in a sustained way, and the time is thus ripe in June to ease the monetary policy stance and start cutting rates,” Rehn said in a speech published on the website of the Finnish central bank.

“This obviously assumes that the disinflationary trend will continue and there will be no further setbacks in the geopolitical situation and energy prices.”

In a Financial Times interview, Chief Economist Philip Lane of the European Central Bank stated, “At this point in time, there is enough in what we see to remove the top level of restriction, barring major surprises.”

The remarks are made in advance of the central bank’s June 6 meeting. The markets are now pointing to a very strong likelihood of a quarter-percentage-point reduction in the European Central Bank’s main rate, which is now at 4%.

Rehn and Lane’s remarks on Monday are in line with a number of other ECB members’ similar opinions.

It suggests that the European Central Bank—which often takes the lead in monetary policy decisions—will probably act sooner than the US Federal Reserve.

“ECB cut likely in June as we brace for higher-than-expected U.S. interest rates,” according to a note released on Friday by Bank of America analysts led by Claudio Irigoyen.

There is a lot of discussion in the US about when the Fed will likely start lowering rates. Due to many positive labour and economic data announcements last week, Goldman Sachs revised its July Fed reduction projection to September.

In the meanwhile, officials were unsure about whether to loosen, according to minutes from the Fed’s policy meeting held from April 30 to May 1.

According to recent “Fedspeak” and minutes, rate cuts in the United States are not now on the table, according to Irigoyen of Bank of America.

“We think that ECB and Fed rate cut cycles will differ, a lot,” he concluded.

(Adapted from Brecoder.com)

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