ECB Officials Cautiously Optimistic About Europe’s Economic Recovery as Inflation Decreases

European Central Bank Executive Board member Isabel Schnabel has stated that the euro zone’s growth momentum is increasing, which is a positive sign that the economy is recovering from the crisis. In a recent interview with German broadcaster ARD, Schnabel expressed hope for a return to price stability without entering a recession, as inflation is decreasing.

Policymakers are preparing for an important meeting in two weeks where they are expected to lower interest rates for the first time after a series of rate hikes. Schnabel confirmed her intention to cut interest rates in June if inflation projections align with their current outlook. However, she cautioned against rushing into further cuts, as this could pose a risk of easing prematurely. Bundesbank president Joachim Nagel also echoed this sentiment.

Despite the cautious approach of Schnabel and Nagel, there appears to be a growing consensus within the Governing Council for three quarter-point interest rate reductions this year, in line with market expectations. This development suggests that the ECB is taking a measured approach to support the economic recovery while maintaining price stability.