Sangsangin "ECB Starts June Rate Cut... Three Cuts Expected Within the Year"

ECB Holds Interest Rates Steady for Fourth Consecutive Time

[Image source=AFP Yonhap News]

Sangsangin Securities forecasted on the 8th that the European Central Bank (ECB) will start cutting interest rates from June this year and will lower them three times (75bp) in total.

Shin Eol, a researcher at Sangsangin Securities, stated, "ECB President Christine Lagarde did not discuss interest rate cuts but mentioned that confidence in achieving the inflation target will be somewhat clearer in April and much clearer in June."

On the previous day (local time), the ECB held a monetary policy meeting and decided to keep interest rates unchanged for the fourth consecutive time. The refinancing rate was maintained at around 4.50%. The main points of President Lagarde's press conference can be summarized into three key aspects. First, the inflation forecast for this year was revised downward from 2.7% to 2.3%.

Along with this, despite high wage pressures, the cumulative effects of tightening are driving inflation moderation, and despite the downward revision of growth forecasts, a rebound in the economy driven by consumption and investment is expected over the next three years. These were the core messages.

In the economic outlook, GDP growth rates were presented as 0.6% (-0.2%p) for 2024, 1.5% (-) for 2025, and 1.6% (+0.1%p) for 2026. Notably, the growth forecast for this year was lowered by 1.0%p since March last year. However, the rebound outlook for 2025 and 2026 was maintained. The CPI inflation rates are projected at 2.3% (-0.4%p) for 2024, 2.0% (-0.1%p) for 2025, and 1.9% (-) for 2026.

Researcher Shin said, "Although the wage negotiations in May will be a variable, considering the current trend, the June forecast is highly likely to reach the inflation target of 2%." He added, "In conclusion, we maintain the forecast that the ECB will start cutting rates in June and will cut three times (75bp) this year."

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