DAVOS, Switzerland, Jan. 15 (Xinhua) -- The European Central Bank (ECB) may not cut interest rates in 2024 due to stubborn inflation, ECB Council member Robert Holzmann said on Monday. Meanwhile, some policymakers appear to be preparing for a shift this year.
The risks arising from ongoing inflation will prevent the ECB from cutting interest rates this year -- even if a recession can no longer be ruled out, Holzmann said in an interview with CNBC at the World Economic Forum in Davos, Switzerland.
The eurozone's yearly inflation rate rebounded in December to 2.9 percent, compared to November's 2.4 percent. Holzmann, who is also Austria's central bank governor, described the ongoing trend as a "sideways movement" that may continue.
"I cannot imagine that we'll talk about cuts yet because we should not talk about it. Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year," Holzmann said.
He echoed ECB President Christine Lagarde and Chief Economist Philip Lane in saying that it is "far too early" to talk about cutting interest rates.
However, others have been more open to speculating about rate cuts.
Joachim Nagel, another ECB Governing Council member and president of the German central bank, has joined a growing number of colleagues who are considering the possibility of interest rate cuts this summer.
Analysts suggest that the ECB is divided over the issue and the eurozone's economic tides are starting to turn.
Nagel said the summer break could be a suitable time to evaluate whether economic growth and inflation have declined enough to warrant policy adjustments.
Earlier this month, Governor of the Bank of Portugal Mario Centeno predicted that the ECB's rate cut would come sooner than previously thought, adding that the central bank should not wait until May to make a decision. Nevertheless, the Governor of the Bank of Greece Yannis Stournaras and his Latvian counterpart, Martins Kazaks, said that mid-2024 could be the right moment to start.
The ECB may face a more complex environment if the U.S. Federal Reserve opts for interest rate cuts in 2024, which analysts say it is doing.
The eurozone may face greater inflationary pressure than the United States due to weakening demand, said Eckhard Schulte, CEO of MainSky Asset Management in Frankfurt, Germany. The ECB may have no alternative but to reduce interest rates, he added.
