Cautious ECB Urges Measured Interest Rate Reductions

European Central Bank officials have urged caution on further interest rate cuts amidst market speculation. While some push for more aggressive cuts, governors from Slovenia, Germany, and Latvia advocate for a gradual approach, emphasizing the need to stay near the neutral rate and consider economic risks.

In the wake of investor enthusiasm over potential significant interest rate cuts, European Central Bank officials have stepped in with a cautionary note. Three key governors highlighted the importance of a careful approach to monetary policy, indicating that the Bank's current deposit rate of 3.25% remains within a carefully calculated range.

Speaking in Washington, Slovenian governor Bostjan Vasle emphasized the necessity of moving gradually towards the neutral rate, which is conjectured to lie between 2% and 2.5%. His sentiments were echoed by other central bankers who expressed concerns about rapidly moving beyond this equilibrium.

The ECB continues to monitor economic indicators, maintaining a strategy of no preset guidance but rather assessing impacts meeting by meeting. Although soft economic landing remains the ECB's target, emerging risks could prolong recovery, signaling a need for prudence in policy adjustments.

(With inputs from agencies.)