ECB Chief Economist Philip Lane predicts a possible interest rate cut by the European Central Bank (ECB) in June. This is reported by the newspaper Handelsblatt. According to Lane, the arguments in favor of this decision are gaining strength. One of the main reasons is the decrease in inflation.

Lane commented on the issue in Spanish newspaper El Confidencial, saying that the current slowdown in inflation, particularly among service providers, supports the prospects for a rate cut. April inflation data and first quarter economic growth figures reinforced his belief that “inflation will return to target in time.” The ECB defines this target as an inflation rate of 2.0 percent.

Inflation in the eurozone is currently 2.4 percent

The inflation rate in the euro area is currently 2.4 percent and is therefore close to the ECB's target. In this context, Lane noted that there are signs of a decline in inflation in service prices, which have recently increased considerably. He is now more confident than before the April meeting. Lane emphasized that more important data is expected in the coming weeks.

The ECB was said to have promised a rate cut by June 6. The most important requirement for this is that upcoming economic data show that the inflation rate will return to its target of two percent by the middle of next year.

The ECB currently maintains the key interest rate at 4.5 percent

In response to excessive inflation, the ECB had raised the key interest rate from 0 to 4.5 percent in a series of interest rate measures from 2022. The measure aims to curb inflation. As a result of the war in Ukraine and the disruption of supply chains, inflation in the euro area had risen to 10.6 percent in October 2022. In December 2022, currency devaluation fell again by below ten percent and has been falling steadily since then.

The US Federal Reserve Bank, like the ECB, has aggressively combated inflation. It raised the key interest rate to the range of 5.25 to 5.5 percent. Inflation also fell significantly in the US, but has recently risen again. Therefore, observers no longer expect three interest rate cuts from the Fed this year, as has long been expected. Only two interest rate cuts are currently considered the most likely option.