ECB can cut rates this summer 'even if US Fed doesn't' 

The ECB held rates unchanged at a record high last week, but its president Christine Lagarde said discussions over easing policy have begun.

The European Central Bank should not worry about cutting interest rates if that means decoupling its policy from the US Federal Reserve, Unicredit economist Erik Nielsen said.

The Italian bank’s chief economics adviser said high levels of employment with elevated wage growth and lots of fiscal support could mean the US economy should stay constricted. If so, eurozone officials should take a different path, he said. 

“The probability is certainly measurable that the US could need to keep rates higher for longer — but Europe not,” Mr Nielsen said.

Financial investors have bet on cuts materialising in tandem by both jurisdictions in June. Questioned on that view, ECB president Christine Lagarde last week insisted her institution “will act independently”. 

Her Finnish colleague Olli Rehn declared “the ECB is not the Fed’s 13th Federal District”. Opinions differ on their freedom of manoeuvre. 

Allianz chief economist Ludovic Subran reckons a scenario where US rates stay high while eurozone borrowing costs fall would be “horrible for the ECB” because “the financial flow risks are too high”. 

Meanwhile, the ECB is increasingly confident inflation is coming down, but should still hold off on an interest rate cut until June, Slovak Governing Council member Peter Kazimir said on Monday. 

The ECB held rates unchanged at a record high last week, but its president Christine Lagarde said discussions over easing policy have begun. 

"We will learn a bit more in April, but only in June, with new forecasts at hand, will the level of confidence reach the threshold," Mr Kazimir said in a blog post.  

"The current picture clearly favours staying calm for the coming weeks and delivering the first rate cut in summer," he added. 

Markets now see four interest rate cuts this year, with the first move coming in June, indicating investors are betting on a move at all but one meeting between June and December. 

• Bloomberg and Reuters