Home » The ECB leaves rates at 4.5% and cuts inflation estimates. Lagarde: independent from Fed

The ECB leaves rates at 4.5% and cuts inflation estimates. Lagarde: independent from Fed

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The ECB leaves rates at 4.5% and cuts inflation estimates.  Lagarde: independent from Fed

BERLIN – No rate cuts. As widely predicted by analysts, the ECB still remains on the sidelines. While waiting for inflation to settle firmly at the declared target of 2%.

But in the press conference following the board of directors, Christine Lagarde seemed to already indicate a date for possible easing of the cost of money: June.

The ECB risks being late on rate cuts by Massimo Giannini 02 March 2024

Between April and June

“We will know a little more in April,” he underlined, “and much more in June.” European stock markets welcomed the news with relief of a cut within the summer; Yields on Italian 10-year BTPs have fallen.

Rates remain at the highest since the introduction of the single currency, at 4.5%. But as the president of the ECB admitted, the meeting of central bankers has already begun to talk «not of a rate cut but of the possibility of backing away from the restrictive territory they are in now».

Undoubtedly the beginning of the discussion on cuts was influenced by a factor incessantly raised by the “doves”: that the cost of money is having clear depressive effects on GDP. The risks for growth, in fact, “are downwards”.

A recovery is in sight

On the risk that the ECB is sacrificing the recovery on the altar of lower inflation, Lagarde wanted to specify, however, that a recovery is in sight.

«We expect a recovery in the second half of 2024 and even more so in 2025.”

This year, however, the Eurozone’s GDP will be anaemic, also due to the slowdown of the German “locomotive” and consumption at a standstill across the continent: Frankfurt expects it to average 0.6%.

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