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ECB’s March Projections Key for Rate Path, De Cos Says

(Bloomberg) -- The European Central Bank’s new outlook for inflation and economic growth, due in March, will be pivotal for deciding when to start cutting interest rates, according to Governing Council member Pablo Hernandez de Cos.

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“The projections will be key to assessing, first, whether we can be sufficiently confident that our 2% medium-term target will be achieved, taking into account the associated risks, and second, the rate path that is compatible with reaching our symmetric target,” de Cos, who also heads Spain’s central bank, told Cypriot newspaper Politis in an interview published Sunday.

ECB officials appear to be looking at the summer for an initial loosening of monetary policy. Chief Economist Philip Lane said Thursday that the March forecasts would provide “the opportunity for a comprehensive update of our medium-term inflation outlook.”

After misjudging the spike in prices that followed the pandemic and Russia’s invasion of Ukraine, de Cos said confidence in staff projections has risen notably. “The forecast errors have been very small and even negative in recent quarters, meaning that inflation figures have been somewhat below projections,” he said.

De Cos sees disinflation in the 20-nations economy as “well advanced” and likely “to continue in the coming quarters.”

--With assistance from Sotiris Nikas and Alexander Weber.

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