No more rate cuts in a row? Lagarde: maybe hold steady in the following meetings!

Golden10 Data ·  Jun 11 16:12

European Central Bank President Lagarde reiterated that officials do not have a predetermined interest rate path, and the first rate cut in nearly five years does not mean a linear decline in interest rates.

According to Christine Lagarde, President of the European Central Bank, while the bank has started to reduce borrowing costs for the first time in nearly five years, it may maintain interest rates at its upcoming monetary policy meetings for more than once.

Lagarde's idea that the European Central Bank may take a series of similar measures after last week's reduction of the deposit rate by 25 basis points to 3.75% was poured cold water, and she said, "This does not mean that interest rates will now be linearly lowered."

"We will not follow predetermined paths," the President of the European Central Bank said in a joint interview with four EU newspapers. "We may also maintain interest rates unchanged at certain stages."

When asked if this meant that the European Central Bank's Governing Council could maintain interest rates unchanged at more than one meeting, she replied, "Possibly. We need to wait and see the development of labor costs. We need to see income continue to digest the economic growth so far."

Lagarde's remarks further illustrate that the European Central Bank is unlikely to cut interest rates again at the next meeting on July 18, as new quarterly wage data for the eurozone will not be released until after that date.

At a time when the European economy is recovering, inflation has rebounded in recent times and wages continue to rise at a near-record pace, the European Central Bank cut interest rates ahead of the Federal Reserve and the Bank of England, a move that shocked some analysts.

The Federal Reserve is expected to maintain interest rates unchanged at this week's meeting in response to inflation pressures, and the Bank of England's meeting next week may also take similar measures.

Since the European Central Bank meeting last week, several other members of the interest rate-setting committee have stated that they believe the bank should adopt a cautious and gradual policy approach over the next few months, and investors have reduced their bets on the size and pace of interest rate cuts by the European Central Bank this year.

The eurozone inflation rate rose from a two-year low of 2.4% in April to 2.6% in May, prompting the European Central Bank to raise its inflation forecast for the next two years.

Lagarde admitted that the recent data "could be better," but said that the decision to cut interest rates was still "appropriate," and added that the "anti-inflation process has already gone deep enough."

She hinted that the European Central Bank would maintain interest rates unchanged, suppress economic development by limiting demand from businesses and consumers, until the inflation rate reached the target level of 2% - the European Central Bank expects the inflation rate to reach 2% by the end of next year.

She told Les Echos, Handelsblatt, Il Sole 24 Ore and the Spanish newspaper Expansión, "We have not yet ended the tight monetary policy cycle. The policy rate is still in the tight range, and we need to continue to tighten policy until the inflation rate returns to 2%."

She described rising labor costs, rising corporate profits, and declining worker productivity (all of which are pushing up price pressures) as "our weaknesses," and said the European Central Bank needed to see data in these areas moving in the right direction.

The translation is provided by third-party software.

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