ECB Lagarde Hints at June Rate Cut... "Cannot Promise Future Path"

Christine Lagarde, President of the European Central Bank (ECB), suggested that if inflation and wage indicators move as expected, a rate cut could be implemented in June. However, she also warned that even if the first rate cut occurs, the subsequent monetary policy path cannot be promised.

[Image source=EPA Yonhap News]

According to economic media CNBC and others, President Lagarde said in a speech in Frankfurt on the 20th (local time), "We will be able to confirm by June whether the inflation path presented in the March forecast remains valid." She added, "Assuming these indicators sufficiently align with the core inflation path and our forecast, and transmission to the eurozone economy (20 countries using the euro) is strong, it will be possible to shift the stage of the policy cycle to a less restrictive policy."

This remark attracted attention amid rising voices inside and outside the market about the possibility of a rate cut in June. It is also seen as an additional signal that President Lagarde is considering a June cut, provided that the trend of easing inflation and wage growth rates is confirmed. Earlier, after the previous monetary policy meeting, President Lagarde had also given weight to the June cut speculation by saying in a press conference, "We will know a little more in April and more in June."

In her speech that day, President Lagarde reiterated that a slowdown trend was confirmed in the wage increase rate indicator for the fourth quarter of last year, and that the first quarter indicator will be released in May. She added that the indicator "will help paint a clearer picture over the coming months." CNBC noted, "The June meeting will be a potential turning point because it is the first meeting where spring wage data can be utilized," and pointed out that "the ECB is cautious about the inflationary impact of wage increases."

She also expressed caution about still-high service inflation, unlike commodity inflation. Based on continued wage increases and slight productivity, she said service inflation "is expected to remain at a high level for most of the rest of this year," and emphasized, "We must continue to verify whether the incoming data supports our outlook."

She continued, "Our decisions must rely on data and be made according to new information obtained at each meeting," stressing, "This means that even after the first rate cut, we cannot promise a specific interest rate path in advance." This explains that even if the June cut occurs as the market expects, the subsequent course is uncertain.

Currently, the market expects the ECB to start cutting rates from June and to lower rates about three times in total. The next monetary policy meeting will be held on April 11. The following meeting is on June 6.

This content was produced with the assistance of AI translation services.