OeNB Governor on Interest Rate Cut in June: “It's Good”

Robert Holzmann expects key interest rates in the euro area to be cut again for the first time in early summer, in view of falling inflation.

Borrowers have been waiting for this for a long time: According to many market watchers, key interest rates in the euro area may be cut at the June meeting of the euro monetary watchdog. Austrian National Bank Governor Robert Holzmann supported this assumption on Friday evening. “It's good if price improvements continue as before,” he said in a ZiB2 interview. “We make decisions based on data. Inflation has come down.” Of course, the reduction is not yet certain, because the last mile is very difficult.

The euro area's two percent inflation target will not be reached until mid-2025. “By the summer of 2024 we will still be above 2 percent,” Holzman said. The exact amount of reduction depends on price and wage dynamics. The economist estimates that the costs of expiring state aid will be small. However, he warned of electoral sweets ahead of the upcoming National Assembly elections. “That could push inflation back up.”

Holzmann disagrees with criticism that the ECB has raised interest rates too much (there have been ten increases since July 2022 to 4.5 percent in response to a sharp rise in inflation). “We certainly didn't go too far.”

When asked about a new tender for the entire OeNB board of directors, a year and a half before the contracts were to end, the governor emphasized that it was important to choose the best people. As is known, he himself will no longer apply; He has other plans.

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