The governor of the Austrian National Bank, Robert Holzman who is also a member of the European Central Bank gave an expectation that it is likely to lower the interest rate by 25 basis points at the end of this year despite the increased risk of inflation.
He also said that a bigger step will take place although the potential of a stoppage cannot be ruled out.
A larger half-point cut is unlikely although not impossible. The ECB may also conclude that an initial cut in October may be sufficient for a December relaxation.
Holzmann, known as a hawkish official, said the market was now expecting another round of policy easing to take place in December and make the cuts steeper.
He has no problem going neutral sooner if the inflation data allows.
Inflation was slower than expected in September, falling to 1.7% and while an increase is expected in the coming months, some policymakers have warned that consumer price growth may exceed the ECB's 2% target.
ECB President Christine Lagarde said last week that downside risks may dominate. – Bloomberg
