MNI BRIEF: Some ECB Officials Switched From April Pause To Cut

Some European Central Bank members considered a pause to rate cuts to be appropriate at April’s Governing Council meeting but changeed their mind after the U.S. tariff announcement on April 2, preferring to wait for the next round of projections “for greater clarity on the medium-term inflation outlook,” ECB accounts published on Thursday showed. 

“Recent events had convinced these members that cutting interest rates at the current meeting provided some insurance against negative outcomes and avoided contributing to additional uncertainty in times of financial market volatility”, the accounts showed, adding that a cut in April could be seen as frontloading a possible cut at the June meeting. In the opposite direction, few members expressed that they could have felt comfortable with a 50-basis-point rate cut.

There was a consensus that the trade war could be deflationary in the short-to-medium term “In part, this was because the euro was seemingly turning into more of a safe-haven currency and was subject to revaluation pressures”.

The range of potential outcomes in the current situation still include some upside risks to inflation.