The European Central Bank could gradually reduce interest rates if inflation falls as expected, two ECB policymakers said today.
The ECB cut rates in June for the first time in the current cycle but has made no explicit commitment about its next move, even if policymakers are clear that further cuts are in the pipeline and only the timing is up in the air.
"The current macroeconomic picture is consistent with a normalisation of the monetary stance," Panetta told a Bank of Finland conference. Rehn said current market expectations - which are for one or, more likely, two rate cuts by the end of the year - were"reasonable" but only"on the condition that the disinflationary process will continue as projected".
He also sought to dampen worries about sticky inflation in services, arguing that services prices had simply started to rise and fall later than goods prices.Extinguishing the last of the undesired inflation pressures, often called the last mile, may just require a bit more patience, he added.
Business Euro Zone Inflation European Central Bank Inflation Philip Lane Fabio Panetta Olli Rehn
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