ECB Policymakers at Odds Over Downturn’s Impact, Sources Say
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2 September 2024 European Central Bank(ECB) policymakers are increasingly at odds on the outlook for growth, a rift that could shape the rate cut debate for months with some fearing a recession and others focusing on lingering inflation pressures, sources close to the debate said. The ECB cut interest rates in June and is almost certain to ease again in September in a nod to slowing price growth. However, policy decisions further down the road are likely to be more complicated as the euro zone economy enters a more precarious state, conversations with close to a dozen sources suggest. The core of the debate is over how weakness in economic growth and a potential recession will impact inflation – the bank’s ultimate focus – as it tries to cut inflation to 2% by the end of 2025. Although much of the discussion is private, conversations with sources with direct knowledge of it reveal diverging views. An ECB spokesperson declined to comment. Policy doves, who remain in the minority, argue the economy is weaker than thought, recession risks are on the rise and firms that have hoarded labour are starting to cut vacancies, leaving the jobs market softer. Once employment declines, so does disposable income, quickly eroding consumption and leaving a self-reinforcing downturn. To find out more details please visit : https://www.reuters.com/ |