MNI BRIEF: Case For ECB Cuts Strengthening, Accounts Show
Doubts persist over the sustainability of the slowdown in services and domestic inflation.
The European Central Bank officials considered that “the case for considering rate cuts was strengthening,” though questions remain over the sustainability of the slowdown in services and domestic inflation, accounts of the January policy meeting showed on Thursday.
Uncertainty also persisted regarding the projected continued decline in the contribution of unit profits to the GDP deflator as well as “the extent to which firms would absorb higher labour costs,” the accounts showed. ECB projections for core inflation were “at the lower end of a range of other forecasts,” it was observed.
“The view was taken that the risks of overshooting versus undershooting the ECB’s symmetric inflation target in the medium term were broadly balanced,” but incoming data is still essential, particularly for the June meeting. (See MNI SOURCES: ECB Wary Of Any "Significant Divergence" With Fed)