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inflation falling but it’s not enough for us. Cuts? More data in June From Investing.com

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inflation falling but it’s not enough for us.  Cuts?  More data in June From Investing.com

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Investing.com – After the latest downward inflation revision, “we are more confident, but not yet enough” to cut interest rates. This is the gist of ECB President Christine Lagarde’s speech.

In the conference following the Frankfurt meeting, in which the European Central Bank decided to leave rates unchanged, the French banker underlined how the ECB continues to be dependent on data in its moves and whether new ones can already be evaluated in April , June will be the month in which “more will arrive”.

In particular, the Governing Council is keeping an eye on data from the labor market.

“Although most inflation indicators have slowed further, domestic inflationary pressures remain, especially wage growth,” Lagarde stressed before reiterating: “We did not discuss rate cuts in this meeting. We need a lot more information which will come in small part in April, but we will have a lot more in June.”

However, the number one on the board admitted that, even if the decision to keep rates unchanged was taken unanimously, “the Board has started to discuss a reduction in the restrictive stance”, in case more evidence arrives on the cooling of the economy. And in any case the ECB will not wait for inflation to return to 2% to begin to loosen its grip.

In short, if everything goes as it should, the date for the first rate cut is set for June.

Inflation and growth revised downwards

In the monetary policy statement, the ECB underlined how inflation has decreased further since its last meeting in January.

Experts now indicate that it would average 2.3% in 2024 (from 2.7% previously), 2% in 2025 (from 2.1%) and 1.9% in 2026. Even the inflation excluding energy and food was adjusted downwards, to an average of 2.6% in 2024, 2.1% in 2025 and 2% in 2026.

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However, “domestic price pressures remain high also due to strong wage growth”.

But the ECB also revised its growth projection for 2024 downwards to 0.6% (from the 0.8% forecast in December). Economic activity is expected to remain moderate in the short term, and then grow by 1.5% in 2025 and 1.6% in 2026, supported initially by consumption and later also by investments.

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