Bundesbank head says interest cut possible before summer break

Germany's top banker has hinted that the first interest rate cut in the eurozone is getting closer.

"Let me put it this way ... the probability is increasing that we could possibly see an interest rate cut before the summer break," said Bundesbank President Joachim Nagel

In an interview broadcast on Friday on the Table Today podcast Nagel emphasized that the move "will clearly depend on the data, but the outlook has brightened as far as that is concerned."

On Thursday, the Governing Council of the European Central Bank (ECB), of which Nagel is a member, left key interest rates unchanged despite a faster decline in inflation.

The most important interest rate for supplying the banking industry with fresh central bank money remains at 4.5%. The deposit rate that banks receive for money parked with the ECB remains at 4%.

Following the discussions in Frankfurt, ECB President Christine Lagarde hinted at a possible change of course for the monetary policy meeting on June 6. "We clearly need more evidence and more data, we will know a little more in April, we will know a lot more in June," she said.

In July 2022, the ECB ended the years of zero and negative interest rates in order to get a grip on inflation, which had climbed to record highs at times. The central bank raised interest rates 10 times in a row. The fact that loans therefore cost more can curb demand and counteract high inflation rates.

However, more expensive financing is also a burden for companies and private investors. In view of the weakening economy, there have recently been increasing calls for interest rates to be lowered again.