At the ECB Forum on Central Banking overnight, ECB President Christine Lagarde hinted that the central bank is not in a hurry to cut interest rates again following its initial rate cut in June.
She highlighted that the central bank is facing “several uncertainties” concerning future inflation. These uncertainties primarily revolve around the dynamics of profits, wages, and productivity, and the potential impact of new supply-side shocks.
Lagarde emphasized that it will take time to accumulate sufficient data to be confident that the “risks of above-target inflation have passed.”
The “strong labor market” was noted as a positive factor, allowing the ECB to “take time” to gather more information before making further decisions. However, Lagarde also acknowledged that “growth outlook remains uncertain,” indicating that the ECB must remain vigilant and adaptable to changing economic conditions.
She reiterated, “All of this underpins our determination to be data-dependent and to take our policy decisions meeting by meeting.”
