Harsh criticism from Kern

Governor of the SNB against ECB interest rate cut

OeNB Governor Robert Holzmann

(Bild: Reinhard HOLL)

On Thursday, the monetary watchdogs of the European Central Bank lowered the key interest rate for the first time since 2016 - by 0.25 percentage points to 4.25 percent. National Bank Governor Robert Holzmann has little sympathy for this move.

He wanted to "send a signal" with his view because the timing of the interest rate cut was too early, Holzmann said on Friday. "My interpretation is that inflation has not yet been won", said the SNB governor.

Inflation forecast revised upwards
Holzmann referred to the inflation forecast for the eurozone, which was revised upwards on Thursday. The ECB now expects an inflation rate of 2.5 percent in 2024 (previously 2.3 percent) and 2.2 percent in 2025 (previously 2 percent).

Some euro watchdogs, who usually lean towards a tight monetary policy, expressed regret on Thursday that an imminent interest rate cut had been signaled too clearly, four insiders told the Reuters news agency.

Sharp criticism from Kern
Former SPÖ Chancellor Christian Kern also criticized Holzmann's statement, saying that the OeNB chief's behaviour was grotesque and harmful.

Holzmann did not comment on whether and when there might be further ECB interest rate cuts. There will be no new inflation forecast data in July. "We will see the September data."

ECB cuts key interest rate for the first time in eight years
On Thursday, the ECB lowered its key interest rate by 0.25 points to 4.25 percent for the first time since the major wave of inflation. The move is considered historic, as it is the first interest rate cut since March 2016. The ECB is thus faster than the US Federal Reserve with its interest rate turnaround.

ECB Director Isabel Schnabel does not want to immediately signal further interest rate cuts due to the uncertain development of prices in the eurozone following her first rate cut. "The outlook for the future development of inflation is still too uncertain to hold out the prospect of further interest rate hikes," said Schnabel on Friday.