ECB must not jump the gun with rate cuts, Finland's Valimaki says
By Anne Kauranen and Balazs Koranyi
HELSINKI/FRANKFURT (Reuters) — The European Central Bank is making progress in lowering inflation to 2% but needs more evidence before rate cuts come on the agenda and policymakers should wait «a bit longer» rather than move prematurely, Finnish policymaker Tuomas Valimaki said.
The ECB ended its quickest interest rate hike cycle in September and with inflation now slowing, the topic of policy easing is creeping up the agenda, though investors and policymaker differ greatly on the timing of the first move.
«It’s better to wait a bit longer than doing a premature exit from this restrictive level, and then perhaps to having to do a reversal,» Valimaki, a Bank of Finland board member, said in an interview.
«We need to avoid declaring victory over inflation prematurely. It would be better to wait and see how data on wages develop,» Valimaki added. He is a temporary but voting member of the ECB's Governing Council who is sitting in for Governor Olli Rehn while he is campaigning to become Finland's next president.
Several key euro zone countries are setting wages in the coming months and ECB chief economist Philip Lane has said the ECB would have crucial data by its June meeting, a hint taken to suggest no rate move until then.
But investors are betting on a much quicker reversal and see 150 basis points of rate cuts in the record-high 4% deposit rate, with the first step coming in March or April.
Valimaki declined to endorse any calendar for policy action but said he has seen no wage data so far that would suggest the ECB's own December projections and rate outlook would be incorrect.
Aggressive rate cut pricing could in fact push back rather than bring forward ECB action because
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