By Balazs Koranyi and Francesco Canepa
FRANKFURT (Reuters) - European Central Bank policymakers will discuss green monetary policy and their upcoming strategy review at a retreat in Ireland next month, where they will also pave the ground for a likely interest rate cut in June, two sources told Reuters.
The ECB is nearing the end of a two-year fight against high inflation, with the internal debate now focused on the path for borrowing costs beyond a well telegraphed reduction from record highs on June 6.
Governors will likely lay some of the groundwork for their June move when they gather at the five-star Mount Juliet Estate in Kilkenny, Ireland, on May 21-22, the sources said.
But they will also tackle some longer-term issues. One is the central bank's next review of its monetary policy strategy, scheduled for next year.
Past reviews, the last of which wrapped up in 2021 after a pandemic-related delay, saw policymakers tweak the ECB's inflation goal, a highly consequential topic for traders at all times and even more so after the recent surge in prices.
But the sources cautioned policymakers will simply be brainstorming at this stage, meaning there won't be specific proposals yet.
An ECB spokesperson declined to comment.
Some economists have speculated that the ECB and the U.S. Federal Reserve might choose or be forced to raise their 2% inflation goals in a new era of trade frictions, geopolitical tensions and climate change. But both central banks have generally dismissed this idea.
Still, ECB President Christine Lagarde once said the euro zone central bank could discuss changing its 2% target once it had brought down inflation to that level, which is now expected to happen by the time the review starts next year.
The other topic up for discussion in Kilkenny is how the ECB should take climate considerations into account when setting policy.
This is a long-running debate that revolves around picking bonds from less polluting companies and giving banks incentives to do the same when they lend.
Lagarde has been organising such retreats around the euro zone since the start of her presidency in late 2019, hoping to bring back harmony in the fractious Governing Council she inherited from her predecessor, Mario Draghi.
Governors generally agree the atmosphere has improved under Lagarde, who has been credited with listening more than Draghi did to her colleagues from the 20 countries that share the euro.