European central bank policymaker Pablo Hernandez de Cos said the European Central Bank should start cutting interest rates in June if inflation continues to decline slowly as expected, on Tuesday.
Inflation has declined rapidly over the past year but forward expectations are still clouded by rising energy costs, persistently high services inflation and ongoing geopolitical tensions. De Cos stated that inflation is expected to continue to decline in the coming quarters, albeit at a slower rate than last year due to some positive effects.
"The Governing Council of the ECB considers that if this view of inflation is maintained, then it is seen as appropriate for the ECB to start reducing the current level of monetary policy tightening in June," De Cos, who is also head of Spain's central bank, said in the Bank of Spain's annual report.
Taking into account the level of uncertainty, he stated that the ECB will continue to adhere to their data-driven approach where decisions are taken at each meeting, without making an initial commitment to a specific rate direction.
With regard to Spanish lenders, De Cos stated that the Bank of Spain is considering setting a "positive level" for the bank's cyclical response capital build-up, which currently stands at 0%, and will announce a decision on whether to activate it soon.
