In a chorus of comments, ECB officias pushed back on market expectations on a rate cut next year.
During a press conference today, ECB President Christine Lagarde emphasized, “We have not decided, discussed or even pronounced cuts.” She underlined that the institution’s strategy will pivot according to incoming economic data and highlighted that the levels and duration of the existing high rates are designed to foster a return to the inflation target of 2%. The focus is on evolving economic indicators, reviewed in a meeting-by-meeting approach, hinting at the bank’s readiness to adapt in the face of changing economic contexts.
Supporting Lagarde’s stance, ECB Vice President Luis de Guindos conveyed skepticism regarding market pricing that forecast a rate cut in June 2024. Speaking to Spanish radio station Cadena Cope, de Guindos mentioned that the markets often rely on speculative “hypotheses that sometimes do not come true.” He viewed such forecasts as gambles, affirming that they might not materialize. “It is a bet, it may be right and it may not be right,” De Guindos added, underlining the uncertain nature of market forecasts.
Martins Kazaks, a member of ECB’s Governing Council, expressed comfort with the current rate levels, showing optimism regarding achieving the 2% inflation goal by the second half of 2025. He maintained that the bank remains open to the possibility of another rate increase if substantiated by forthcoming data.
Kazaks was assertive in dismissing speculations about a rate cut in April, stating such conjectures are “inconsistent with our macro scenario.” He reiterated the bank’s firm stance to “stay in restrictive territory for as long as necessary to get inflation to 2%.”
