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ECB’s Wunsch Says Talk of Half-Point Rate Cut Is ‘Premature’

By Joe Mathieu and Kailey Leinz
Pierre Wunsch, governor of the National Bank of Belgium, during a Bloomberg Television interview at the annual meetings of the International Monetary Fund (IMF) and World Bank in Marrakesh, Morocco, on Thursday, Oct. 12, 2023. The IMF and World Bank’s first annual meetings in Africa since 1973 were expected to give a spending boost to Morocco’s fourth-largest city and one of its top tourist destinations. Photographer: Hollie Adams/Bloomberg (Hollie Adams/Bloomberg)

(Bloomberg) -- European Central Bank Governing Council member Pierre Wunsch said it’s far too early to start considering a half-point interest-rate reduction in December.

In an interview on Bloomberg Television’s “Balance of Power” on Thursday, the Belgian central-bank-chief said that while the euro-zone is showing signs of weakening, officials must still await further inflation data and watch how the economy develops before coming to any conclusions.

“I don’t see why we should have discussion on a 50 basis point in December,” Wunsch said. “I think really it’s premature.”

Money-market trading earlier on Thursday went back and forth on whether to price in a half-point cut as policymakers wrangled over the pace and extent of easing amid a faster-than-expected inflation retreat and an economy that’s flirting with recession. 

The Belgian has long been one of the ECB’s more hawkish officials. Speaking at the sidelines of the International Monetary Fund annual meetings in Washington, he said that the slowdown consumer price-growth shouldn’t be exaggerated.

“I would not over-dramatize inflation falling to 1.8% or 1.7% honestly, we’ve been way above 2% for a while,” Wunsch said. “To the extent that it would be imported inflation which is low, that’s a completely different scenario than domestic inflation being close to or below target — which is not the case today.” 

The tone of his comments chimed partly with those of ECB President Christine Lagarde, who said this week that the direction for rates is “clear” – down – but that the speed must be determined as new data come in. 

“Directionally, we can start removing and maybe even accelerate removing restrictive monetary policy,” Wunsch said. “I would not make a bit in terms of the speed at which we will get there as of now.”

Earlier Thursday, Bundesbank President Joachim Nagel told Bloomberg TV that the ECB shouldn’t rush to lower borrowing costs. 

By contrast, Portugal’s Mario Centeno said the ECB needs to get “as soon as possible” to the neutral level of rates that neither stimulates nor restricts the economy and that it should be open to cuts of 50 basis points.

--With assistance from Mark Schroers, Jana Randow, Alexander Weber, William Horobin and Viktoria Dendrinou.

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