ECB Governors Anticipate Possible Rate Cut in June
FRANKFURT (Reuters) - Some European Central Bank policymakers see a high chance of a further interest rate cut in June as a trade war and the associated market turmoil dent the economic outlook, four sources told Reuters.
The ECB lowered borrowing costs for the seventh time in a year on Thursday but President Christine Lagarde gave little away about the path ahead for rates, saying the bank needed to stay firmly in the mode of making decisions meeting by meeting.
Some of her colleagues on the Governing Council are still undecided about the way forward and want to see how soft indicators of economic activity and other variables such as energy prices pan out before making any predictions about their next meeting, the sources said.
But others are already leaning towards a new rate reduction on June 5 unless there was a dramatic easing of trade tensions between the European Union and Donald Trump's U.S. administration.
An ECB spokesman declined to comment.
One source said only Trump's acceptance of the EU's "zero-for-zero" proposal, in which both sides take off all bilateral tariffs, would convince them to back a pause in June.
Another source, who said he would have advocated for a pause before the trade war broke out, said he also saw a June cut as a more likely scenario, given the current turmoil.
But he and others added rate cuts do not necessarily mean a lower end point for rate cuts and could also be seen as front-loading the moves to buffer the economy.
(Reporting By Francesco Canepa and Balazs Koranyi)
