- ORIGINAL NEWS
European Central Bank’s Lagarde signals June cut but says future rate path uncertain
- SUMMARY
The European Central Bank (ECB) is considering reducing interest rates in June.
President Christine Lagarde has indicated that the bank will reassess its economic forecasts in June, and if inflation remains on track to decline as expected, it may lower rates.
The decision will depend on data on wage negotiations, underlying inflation, and the labor market.
The bank is concerned about potential inflationary pressures from rising salaries but is confident that inflation will eventually fall.
Lagarde emphasized that even if rates are cut in June, inflation may remain elevated in some sectors, particularly services.
The ECB will need to continue monitoring the situation to ensure that its inflation outlook is met.
Despite geopolitical uncertainty and domestic price pressures, Lagarde expressed optimism about the inflation outlook.
The bank’s macroeconomic projections forecast inflation to average 2.3% in 2024, 2% in 2025, and 1.9% in 2026, which is below the bank’s target of 2%.
The ECB has held interest rates steady since September 2022 when it reached a record high.
The next ECB meeting is in April, followed by a key meeting in June where a decision on rate cuts is likely to be made.
The market is expecting three to potentially four rate cuts this year.
- NEWS SENTIMENT CHECK
- Overall sentiment:
positive
Positive
“June has been flagged as a key month by numerous members of the ECB’s Governing Council, which votes on the path of rates.”
“Lagarde’s message overall was highly positive on the path on inflation, despite flagging geopolitical uncertainty and ongoing domestic price pressures.”
Negative
“Euro zone inflation cooled to 2.6% in February, though the print for services remained stickier at 3.9%.”
“It next meets in April, then June.”