MNI BRIEF: ECB Rate Cut Talk Will Depend On Data - De Cos

It is too early for the European Central Bank to consider any easing, but economic data mean it is impossible to say the subject of cuts will not soon be discussed, Bank of Spain Governor Pablo Hernandez de Cos said in an interview with Borse Zeitung on Friday.

“It depends on whether or not inflation and growth develop in line with their projected paths”, he said, when asked how long rates should remain at current levels. Current pricing reflects the conviction that rates will remain at a restrictive level as long as necessary and that inflation will continue to fall to the target as well as “that rates will also be adjusted”.

“As inflation falls, it is realistic to expect the policy rates to be eased back to neutral”, he said, adding that pricing reflects market confidence in ECB projections. Asked whether rates have reached peak, de Cos said the ECB would respond to additional inflation or growth shocks. (See MNI INTERVIEW: September Rate Rise Probably ECB's Last- Simkus)

With regards to any consideration of accelerating the end of reinvestments in the ECB’s Pandemic Emergency Purchase Programme, he said the ECB should be very cautious and remember that it’s the “first line of defence” if there are problems in monetary policy transmission.