ECB’s Wunsch says additional support for economy by rate cutting is needed

According to statements by Pierre Wunsch, member of the Governing Council of the European Central Bank (ECB), the eurozone economy may need to set interest rates at a “moderately supportive” level. He explains this point of view by pointing at the risks of inflation falling below target due to the recent economic turmoil.

The official's comments spurred expectations of another rate cut in June after seven previous cuts in the current cycle. 

According to the official, two more quarter-point rate cuts to 1.75% is a scenario that is currently viewed as realistic by markets and forecast by economists. These actions will mean a transition of the region's monetary policy to a “moderately supportive” level. At the moment, the economic prospects of the eurozone directly depend on the nature of the US trade policy. Earlier, US President Donald Trump temporarily reduced tariffs in order to continue negotiations with his trading partners, including the European Union.

To reflect possible outcomes, the financial regulator will publish alternative scenarios along with its quarterly forecasts next month, ECB chief economist Philip Lane said on Friday.