FRANKFURT (Reuters) – The European Central Bank is increasingly confident that inflation will fall back to its 2% target by mid-2025 as wage growth moderates, strengthening the case for lower interest rates, ECB board member Piero Cipollone said.
The ECB has flagged a possible rate cut for June depending on further good news on wages and comments from Cipollone in his first policy address since joining the board suggest the process was heading in the right direction.
“Wage growth appears on track to gradually moderate in the medium term towards levels that are consistent with our inflation target and productivity growth, in line with the projections,” Cipollone told an event in Brussels
“As our confidence in the timely convergence of inflation to our target grows, it also strengthens the case for adjusting our policy rates,” Cipollone said.
Cipollone cautioned against excessive focus on short-term wage developments, arguing that a recovery in household earnings was necessary and even after such a catch up, real wages would still be below levels justified by labour productivity growth since the pandemic.
He added economic uncertainty has receded so the ECB is also becoming more confident in its own projections, which show a continued slowdown in inflation with the target hit next year.
(Reporting by Balazs Koranyi)
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