ECB interest rate outlook catches eyes amid conflicting views

(Alliance News) - Some analysts are pricing in a rate cut in the second quarter from the European Central Bank, despite opposing comments from a Governing Council member.

The ECB is unlikely to cut rates before the summer, a Governing Council member said on Monday, according to Bloomberg.

Boris Vujcic, the chief of the Croatian central bank, said policymakers will need to be convinced that inflation is slowing and will look at labour market data, Bloomberg reported.

"We're not talking about cutting interest rates now, and probably won't before summer," he told a Croatian news channel, Bloomberg reported.

Vujcic said both the eurozone and his native Croatia are likely to avoid a recession.

At its December meeting, the Frankfurt-based ECB left the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility at 4.50%, 4.75% and 4.00%, respectively.

Speaking at a press conference after the announcement, ECB President Christine Lagarde said the bank "did not discuss rate cuts at all - no discussion, no debate on this issue".

However, Alexander Valentin, senior economist at Oxford Economics, said he expects a rate cut in the second quarter, to provide "some much-needed stimulus for the eurozone economy."

Analysts at Brown Brothers Harriman are also pricing in a second quarter cut.

On Monday, analysts had some data from the eurozone to digest, as well as Vujcic's comments.

"The European Commission's economic sentiment indicator significantly improved in December, although it remained at a subpar level. Less positive was the increase in price expectations across the board, suggesting that the European Central Bank is unlikely to be pushed into early easing," said Peter Vanden Houte, chief economist at ING.

Consumer confidence in the eurozone improved in December, according to the latest flash estimate from the European Commission on Monday, while economic sentiment was also more positive.

In December, consumer confidence stood at negative 15.1 points, improving from negative 16.9 in November. The estimate met market predictions, according to FXStreet-cited consensus.

Meanwhile, economic sentiment in the eurozone improved.

The economic sentiment indicator increased by 2.4 points to 96.4 in December, from 94 in November. The employment expectations indicator remained virtually stable at 102.8, from 102.7 the previous month.

By Sophie Rose, Alliance News senior reporter

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