Possible to have no rate cuts this year: European Central Bank member

The European Central Bank may defy market expectations and hold off on starting interest rate cuts during the whole of 2024, the institution’s Governing Council member Robert Holzmann said Monday.

Asked about those who call for the first rate cut to take place as soon as April, Austria’s central bank governor told CNBC, “I’m afraid, leaving Davos, those people will be deeply disappointed.”

Speaking to CNBC’s Steve Sedgwick at the World Economic Forum in Davos, Switzerland, he added, “I cannot imagine that we’ll talk about cuts yet, because we should not talk about it. Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year.”

Headline inflation in the euro zone rose to 2.9% in December, up from 2.4% the previous month, largely on the back of energy prices. The ECB targets inflation at 2%.

“Unless we see a clear decline towards 2%, we won’t be able to make any announcement at all when we’re going to cut,” Holzmann said.

Holzmann was ranked as one of the most hawkish Governing Council members in a recent survey by InTouch Capital Markets.

He also flagged the “overlying problem” of geopolitical changes in the Middle East, as the Israel-Hamas war continues and tensions expand to include Lebanon’s Hezbollah and Yemen’s Houthis.

“Prices on a day-to-day basis may increase, but it may also risk to change the way we do business, structural changes, which take longer, but which also have the danger of price changes in the future. If both come together, our current outlook [for] December will deteriorate, and it will take much longer to bring prices down,” Holzmann said.

Correction: This story has been updated to reflect the name of CNBC anchor Steve Sedgwick.