FRANKFURT (Reuters) – The European Central Bank will cut interest rates in June but needs to be very cautious about subsequent moves and take into account signals from the U.S. Federal Reserves, ECB Vice President Luis de Guindos said in a newspaper interview.
“Assuming there are no surprises between now and then, as you say in French, it’s a ‘fait accompli’,” French newspaper Le Monde quoted de Guindos as saying in Tuesday. “As for what happens afterwards, I’m inclined to be very cautious.”
Markets see two more rate cuts after June, most likely in September and December, but expectations have retreated in recent weeks on fears the Fed itself will delays cuts, possibly into next year.
“What the Federal Reserve decides is crucial not only for the United States, but also for the global economy, which also affects the euro area,” de Guindos said.
The ECB needs to take exchange rates moves and capital flows into account when it decides on interest rates since a growing interest rate differential will redirect capital to the U.S.
(Reporting by Balazs Koranyi, Editing by Rachel More)
