The European Central Bank could take the next interest rate hike off the agenda following a "substantial" drop in inflation and policymakers should not give any indication that rates will remain stable until mid-2024, ECB Board member Isabel Schnabel said.
The comments marked a shift to a more conservative stance for Schnabel, seen as the most influential voice in a group of conservative policymakers giving comments that raised expectations for a rate cut as investors now expect the ECB to reverse its tightening interest rate hikes.
European zone inflation eased to 2.4% last month, from more than 10% a year earlier, after 10 consecutive rate hikes. This puts the ECB's inflation target of 2% within reach.
Schnabel, in the past month has insisted that rate hikes should remain an option because the fight against inflation may be the most difficult and is in its final phase. He has also changed his stance after three shocking inflation readings in as many months.
After Schnabel's comments, investors were betting on 142 basis points of rate cuts next year, up from 130 basis points the previous day. Schnabel also cautioned against giving the market guidance on interest rate moves too far ahead, following a rapid turnaround in inflation numbers that surprised policymakers.
ECB President Christine Lagarde, French central bank chief Francois Villeroy de Galhau and Bank of Greece Governor Yannis Stournaras all gave guidance for steady rates for "several" quarters, even as markets eyed rate cuts in the early spring.
