In the face of rising inflation, the European Central Bank’s (ECB) decision to hold interest rates steady has sparked reactions from experts.

Jean-Claude Trichet, former ECB president, expressed confidence in the central bank’s progress towards its 2% inflation target.

Trichet emphasized that the ECB did not commit to a rate cut in June but acknowledged that the market now sees a high probability of a decrease at the next meeting.

However, he cautioned against considering it a certainty due to ongoing uncertainty and geopolitical tensions.

Comparing the current situation to past economic shocks, Trichet highlighted the ECB’s focus on data-dependency.

He explained that maintaining confidence in the central bank’s commitment to price stability is paramount, especially during uncertain times.

Trichet cautioned against the comparison with Lehman Brothers, citing marked differences in inflation levels.

Instead, he drew parallels to the first and second oil shocks, where benign neglect by central banks led to higher inflation.

The ECB’s decision to maintain record high rates differs from the Federal Reserve’s recent increases, despite both banks pursuing the same 2% inflation goal.

Trichet noted that this sequence of decisions was unusual but stressed that both central banks remained committed to price stability.

Trichet anticipates the ECB decreasing rates in the near future while the Fed may not, even though it has a higher level of inflation.

He emphasized that both central banks must demonstrate their credibility in achieving their inflation targets.

Uncertainty and geopolitical tensions make rate cut less certain.

The market might see a rate cut as a certainty, but the ECB hasn’t committed to it yet.

Ongoing uncertainty and geopolitical issues make a rate cut less certain.

The ECB is focused on being data-dependent.

The current economic shock is different from Lehman Brothers.

The ECB is focused on data to make decisions, rather than making hasty decisions that could lead to inflation.

The ECB is independent from other central banks, like the Federal Reserve .

The ECB has taken a different approach than the Federal Reserve in raising interest rates.

However, both central banks are committed to price stability and will make their decisions based on their own economic data.