(Bloomberg) -- European Central Bank officials looked past concern over longer-term inflation in cutting interest rates last month — arguing that waiting for a fully complete picture on prices would make them act too late, an account of their policy meeting showed.

Policymakers convening in Frankfurt on June 5-6 deemed assumptions that energy and food inflation would move below longer-term averages in 2026 highly uncertain, according to the summary, published Thursday.

“At some point, it was necessary to make a judgment call based on the information available, even if that information was less conclusive than might be preferred,” the ECB said.

June saw the ECB begin to trim record-high borrowing costs as inflation nears the 2% target. Consumer-price growth, though, is likely to track sideways for the rest of 2024, and policymakers are wary of cutting rates too quickly amid elevated uncertainty over everything from wage gains to French elections.

Investors reckon there’ll be one or two more reductions in the deposit rate by year-end — a timeline several officials have signaled they support.

Other key comments from the account:

On Interest Rates

  • “At some point, it was necessary to make a judgment call based on the information available, even if that information was less conclusive than might be preferred. Such an approach should not be seen as conflicting with data-dependence, as waiting for full confirmation would almost certainly imply cutting interest rates too late, potentially creating a significant risk of undershooting the target”
  • “Even following a 25 basis point cut, interest rates would remain in restrictive territory in relation to any current estimate of the natural or neutral rate of interest”
  • “Cutting interest rates by 25 basis points offered greater protection against downside shocks than keeping them at their current levels”

On Inflation and Wages

  • “New headwinds could emerge for goods inflation in a world that was more prone to frequent supply chain disruptions, geopolitical fragmentation, protectionism and climate change dynamics. Hence, in the future low goods inflation would not always reliably compensate for an overshooting in services inflation”
  • It was important “not to overreact to adverse data or inflation numbers for a single month, since these did not necessarily imply a new trend and could reflect one-off factors, in the same way that it had been important not to overreact to positive numbers in previous months”
  • “While the projection for 2026 was unchanged, it was pointed out that this rested on the assumption that energy and food inflation would move below their longer-term averages. In view of the notoriously volatile nature of these two components and their exposure to the effects of geopolitics as well as climate change and transition policies, these benign assumptions were seen to be highly uncertain”
  • “Wage dynamics were therefore likely to slow once this process was complete and inflation was normalizing”

On the Economy

  • “The concern was raised that, in the presence of both domestic political and geopolitical uncertainties, the saving ratio could go even higher than expected. If this were to happen, consumption could be curtailed for longer”

--With assistance from James Regan.

©2024 Bloomberg L.P.