Here’s what the 10 ECB members said this week about inflation, the big cut

After the European Central Bank cut interest rates for the third time this year – and inflation fell below target – all eyes are now on policymakers’ next move.

Several members of the Governing Council spoke to CNBC’s Karen Tso at the International Monetary Fund’s annual meeting in Washington, DC this week. We asked them about the inflation outlook, the likelihood of a 50 basis point rate cut in December, and more.

With an average cutoff of 50 points: “Yes, everything has to be on the table, you know, given what the data is telling us. But we’ll have that conversation in December, and we’ll have that conversation early next year, and from meeting to meeting … We’re also getting closer to the 2% target, and as the economy weakens more on the prices, the way down to 3.25, we are still in limited areas.

“So reducing the pressure on rates, of course, is what we would have to do, and this is what we would do. But, you know, we need to see the data… There’s both a 0% cut, a 25-point cut, you know, and maybe it’s possible that there have been significant cuts, but that will all depend on the data.”

“Well, if you say you depend on the data, you depend on the data. I don’t want to wait for what the data will tell us. There may be a discussion, indeed, about whether we need to lift the ban sooner than we thought, or not, depending on the 50-point data it would be a big move, so- so I think it’s only going to be okay if we have the data, which would be, you know, inflation maybe and in terms of GDP growth going in the wrong direction, which is not really what we’re seeing today.

“… I’m not leaving anything out, but we’ve started early in reducing prices. I think it’s good if we can be … a little bit more and not create an unwanted volatility in the market.”

“The data will tell, but the reality is that inflation in September was much, much lower than we expected. This was true in title but also in context. So together, inflation is as close to 2% in the medium term as it can be, and we need to factor that into our story.

“After that, we need to look at the data that’s coming in, the trends in the data that we’ve been looking at. And certainly, 50 points can be on the table, because we continue to depend on the data, and the data that we’re getting. He points there.”

“Are we running the risk of missing our inflation target? I do not think so. And why not? Well, look at the salaries. Wages are still running at twice the pace that would be consistent with a return to headline inflation of 2% and half a percent of productivity growth.

“Unfortunately, we don’t have more productivity growth in the euro area, as long as wages are at that high level, yes, there may be a short-term target, but I don’t think the risk is structural, the long-term undershoot is very important.

“The 1.7 [September inflation print] temporary blip. It is entirely due to basic effects and will probably disappear from the data again in the coming months. So we’re taking a medium-term stance on our policy, and that statement [about returning inflation to 2%] it is intended to ensure that, yes, in the medium term, we are willing and committed to deliver[ing] inflation is back to 2%, which is our target.”

“I’m sure some of my partners will be very dependent, others won’t. In my case, I will say I will look at the data.

“If things get really bad like some say, we can have 25 more [basis point cut], [but] 50? I would say at the moment with the data, no.”

For reduced rate: “This discussion about 25 or maybe something different is not helpful. We live in an uncertain environment so we have to wait for new data and then we have to decide.

“We did what we did [at the October meeting]and this is based on how we have conducted monetary policy in the past, so we maintain our flexibility in all areas.”

For inflation: “I think we shouldn’t be complacent here. It was there [below target] The September data … maybe there is some chance that the upcoming October, November, December data may go in the other direction. So as I said, we have to keep our flexibility here, a data-driven approach, I think this is the best strategy that has worked well in the last two and a half years. “

For inflation: “Success is evident, but we should not be complacent.”

In the event of a soft economic landing: “I think we can have a reasonable level of confidence. Remember two years ago there was a lot of fear on both sides of the Atlantic that we would have a recession, and that the so-called sacrifice ratio, the price to pay for growth. by returning to the inflation target, it could be very high. It is not.

“I think the honesty of our approach played a big role, because we were honest, inflation expectations remained strong, so the interest rate in this last episode of disinflation was very low, remember 50 years ago, the episode of Volcker. .”

In economics: “I think we have good news and very bad news from Europe. The good news is that disinflation is on the way. That is important. It improves the real income of our households and citizens. Also, employment remains strong, overall, strong. on the other hand, we see a weak growth outlook, and we see that output growth is Europe’s Achilles’ heel. Inflation is on the way, and because we see a weak growth outlook, it also increases inflationary pressures.”

For reduced rate: “The direction is clear. We continue the cycle of downsizing. The speed and scale of downsizing depends on incoming data. And we look, in particular, [at] three factors, three variables in this story. First, inflation; second, latent inflation, which means cuts in energy and food prices, and third, the power of monetary policy transmission. That’s data dependency. To me, it is not, definitely, any kind of data point dependence. It’s more, I’d say, analytically dependent.”

For reduced rate: “We are moving clearly … towards easing monetary policy. So, for now, I can clearly say that, in the upcoming meetings … [we are] you will definitely see cuts. But what are cuts? How big they are, or if they are big, will depend on the data we have at the time of the decision.

“… I don’t think that these very good pieces, you know, are somehow supported, unless we see, we see clearly, we see something unexpected and bad and expected in the data. And until now, we didn’t think. that … this could be a case but the decision of – October for me means that we meet, by meeting, depending on the decision of the data.

In economics: “Well, in Europe, it does not look as good as it was six months ago or three months ago. It is true that the PMIs are there, in particular, they show a recession. More, I’m afraid, Part of it is cyclical … Yes, now we are on the way down with the estimates ours, which will help part of the cyclical … [the] average time.”

For reduced rate: “I am completely open to any discussions in December. Personally I do not know what the decision will be, and I think we should know now, because we have to wait if we depend on the data, we should not talk now. about 25 [basis points] compared to 50, or perhaps a break in December. Anything can happen depending on the incoming data.”