Minutes of ECB meeting show interest rate cuts are moving up the agenda

Policymakers meeting in Frankfurt said inflation was making “encouraging” progress toward their 2pc target, though they weren’t yet ready to sound the all-clear, according to the account of the March 6-7 gathering, published yesterday. Inflation has since fallen further.

“While it was wise to await incoming data and evidence, the case for considering rate cuts was strengthening,” the ECB said, citing its latest projections, progress on the three criteria set out to guide its assessment and lingering risks.

It said the date of a first rate cut is now “coming more clearly into view”. June is now seen as the likely month to start lowering interest rates. Investors are now looking for pointers on how quickly monetary loosening will unfold, and where it will end.

Some officials are wary of allowing inflation to rebound, should they act too quickly, while others fear the bloc’s economy may be suffering unnecessarily under the weight of high borrowing costs.

European policymakers are on track to deliver an interest rate cut in two months’ time after the rate of inflation in the eurozone fell by more than expected.

‘People should not expect rate cuts to be dramatic or rapid, even once they start coming down’

In what is set to be a massive boost for first-time buyers and those on ­tracker mortgage rates, the European Central Bank (ECB) could begin a string of cuts in June with a 0.25 percentage point reduction. Economists said the odds shortened this week for a June rate reduction after eurozone inflation came down to 2.4pc in March, from 2.6pc the previous month. This is close to the ECB’s target inflation rate of 2pc.

The Governing Council of the ECB, which decides on interest rates, meets next week. Some economists think the ECB could announce a rate cut at this meeting but officials including Irish Central Bank Governor Gabriel Makhlouf have pointed to Euro area wage data that won’t be available until their June meeting as a crucial part of their decision making.

He said last month that people should not expect rate cuts to be dramatic or rapid, even once they start coming down.

“When we get to the point of feeling, actually, you know, we’re confident enough about meeting our target, then we’ll recalibrate the stance and reduce our policy rates.

“But I expect the [policy] stance to remain restrictive for some time – but just not as restrictive,” he told the Irish Independent after returning from the March meeting in Frankfurt.

Markets have priced in for the ECB to most likely deliver four cuts this year that will reduce the official ECB refinancing rate from 4.5pc to 3.5pc.

There is less consensus on whether the US Federal Reserve will reduce rates there two or three times.