- That suggests the Governing Council is preparing the ground for an interest-rate reduction.
- However, President Lagarde refused to discuss when the cut may occur, suggesting it won’t be anytime soon.
- Bloomberg Economics still thinks it will come in June, although the ECB has left open the possibility of April.”
- “I certainly stand by them,” Lagarde told reporters Thursday in Frankfurt, referring to comments last week in Davos where she described that schedule as “likely.”
- “We need to be further along in the disinflation process before we can be sufficiently confident that inflation will actually hit the target in a timely manner,” she said after the ECB left its deposit rate at a record-high 4% for a third meeting, as ...
(Bloomberg) -- President Christine Lagarde’s muted affirmation that the European Central Bank may begin lowering interest rates from around mid-2024 was taken by markets as a sign that earlier moves are very much in play.
While she stood by remarks from Davos that borrowing costs could be trimmed from the summer, traders stepped up bets on cuts — pricing an 90% chance of a reduction in April and 141 basis points of easing across the whole year, up from 130 basis points before.
The wagers come despite pleas from the likes of the International Monetary Fund that central bankers around the world don’t loosen monetary policy too hastily, before inflation is overcome.
- “Although President Lagarde ‘stands by’ her previous comments which suggested that summer cuts are likely, the rest of her narrative appears to be supportive of earlier rate cuts,” said Seema Shah, chief global strategist at Principal Asset Management.
- “The consensus around the table of the Governing Council was that it was premature to discuss rate cuts,” Lagarde said.
- “We need to be further along in the disinflation process before we can be sufficiently confident that inflation will actually hit the target in a timely manner.”
“Upside risks to inflation include the heightened geopolitical tensions, especially in the Middle East, which could push energy prices and freight costs higher in the near term and hamper global trade,” Lagarde said. . .
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