EUR Rates: ECB's Patsalides opposes larger cuts, sees temporary inflation dip

European Central Bank policymaker Patsalides has pushed back against aggressive rate cut expectations, stating that a larger reduction is currently unwarranted despite potential temporary inflation undershoots. His comments suggest maintaining optionality in monetary policy remains crucial for the ECB. The stance indicates support for a measured approach, likely favoring a single rate cut in June followed by an extended pause to assess economic conditions. Markets interpret this hawkish tilt as preventing European long-term yields from surging, which could occur if aggressive cuts were perceived as policy error. The neutral rate view signals the ECB is comfortable with current inflation trajectory and not concerned about persistent undershooting of the 2% target. This measured approach could provide support for the euro against major currencies as it suggests the ECB won't rush into aggressive easing cycles seen elsewhere.