Lagarde Signals Potential ECB Interest Rate Cut in Summer Amidst Wage Growth Uncertainty

European Central Bank (ECB) Governor Christine Lagarde suggested on Wednesday that the ECB might implement interest rate cuts in the summer. Speaking at the World Economic Forum in Davos, Lagarde noted that sufficient data on wage growth would be available by "late spring," enabling central bankers to determine whether eurozone inflation is set to rise or fall.

In an interview with Bloomberg, Lagarde highlighted a "catch-up in wage bargaining," emphasizing that the ECB was monitoring whether this catch-up would be robust enough to influence prices. She stated, "We should have information that we can verify in late spring."

Responding to questions about her agreement with fellow ECB board members who indicated expectations of interest rate cuts in the summer, Lagarde commented, "And I would say it's likely. But I have to be reserved because we also say that we are dependent on the data and that there is still a level of uncertainty and some indicators that are not anchored at the level that we would like to see them."

Lagarde's remarks come just before the "quiet period" preceding the ECB's monetary and interest rate policy meetings, with the ECB governor aiming to manage market expectations of an imminent rate cut while acknowledging the central bank's inclination to reduce the cost of loans.

Market participants adjusted their expectations for total ECB rate cuts this year following Lagarde's interview. They now anticipate a total eurozone rate cut of 140 basis points (1.4%) by year-end, equivalent to five rate cuts of 25 basis points each, with a 60% chance of a total of six such cuts within 2024. Investors are now less convinced that the first rate cut by the ECB will occur as early as April, a scenario previously considered almost certain.

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!