ECB: Centeno Sees No Reason Not To Cut In April

Characteristically dovish comments from ECB's Centeno to Econostream:

• "We still see, and it is in our baseline, that the convergence to 2% inflation is consistent with the trajectory of interest rates expected by markets. The baseline incorporates a trajectory of interest rate reductions that is not yet completed. Given the fragility of the economy and where the neutral rate is estimated to be, we can expect further rate cuts".
• "The most recent forecasts do not tell us to pause in April. We may need new projections to pause. At this juncture, neutral is not a very important concept, in the sense that it needs to be analysed together with other pieces of information. But, I am not sure that being at neutral will be enough to sustain inflation at 2% due to the current weakness of the economy and the threats it faces."
• "It will be important to continue, for sure, looking at monthly inflation prints. Lately, we have been quite precise in inflation forecasting. I hope we continue to be reassured on this. Wages are also something we need to monitor. Probably, at this juncture, sentiment indicators are also important. If we enter a spiral of negative sentiment, that will translate into a subdued economic growth"
• "I think we all agree that we are not as restrictive as we were before. However, if you look at credit flows in real terms, they remain lower compared to pre-inflation period levels. Even if credit recovers somewhat, it is still low. But we can conclude that we are less restrictive today".
• On inflation risks: "I think there are risks on both sides. But I still believe that downside risks prevail. This is mainly because we don't have an economy that is compatible with inflation above 2%"