FRANKFURT (MktNews) - A rate cut by the European Central Bank, while not ruled out, is unlikely Thursday, as February's eurozone M3 money supply data would make it harder for the central bank to justify such a move on the grounds of clearly receding medium-term inflation pressure, an ECB source told Market News International Wednesday.
The source argued that the ECB's mandate requires it to have "some evidence of new elements changing the picture on inflation" for the central bank to justify a rate move.
The source replied "yes" when asked if the higher-than-expected February M3 data released Wednesday lowers the chance of such a justification.
The data showed the M3 annual growth rate stable at January's 4.7% reading and the three-month rolling average falling only marginally to 4.8% from 4.9%, still above the ECB's 4.5% reference rate.
While refusing to rule out a rate cut Thursday, the source made it clear that he considered it unlikely.
"Until the other day, the ECB's position was that the monetary stance is neutral, neither restrictive nor expansive with regard to the (business) cycle," the source said.
"The question is: Have there been new developments in the last 15 days? I would say the new data in that period have been a bit in one direction and a bit in the other," he said.
The source said a 25-basis-point rate cut would have "essentially a psychological value on expectations," while in terms of its direct effect "it would probably only raise eurozone growth by about 0.1 percentage point in about one and a half years' time."
The source also said he expects eurozone harmonised consumer inflation (HICP) to fall below the ECB's 2% inflation limit "sometime in the second half of this year."