(Reuters) – The European Central Bank (ECB) will cut interest rates in June but will then have to be very careful and take into account the decisions of the Federal Reserve, Luis de Guindos, vice-president of the ECB, said on Tuesday , during an interview with the daily newspaper “Le Monde”.
“We will reduce the restrictive nature of our monetary policy in June. As we say in French, unless there are any surprises between now and then, it is a fait accompli,” declared the head of monetary policy. “Beyond that, I prefer to be very careful.”
The markets are counting on two other rate cuts after June, most probably in September and December, but operators have been revising their expectations downwards in recent weeks, with the Fed warning that its rates could remain more permanently restrictive than expected.
“The decisions of the Federal Reserve are essential not only for the United States, but also for the global economy, and this also influences the euro zone,” underlined Luis de Guindos.
The ECB must take into account movements in exchange rates and capital flows when deciding on monetary policy, because too wide a rate differential with the Fed would divert capital to the United States.
(Written by Balazs Koranyi, Corentin Chappron, edited by Blandine Hénault)
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