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ECB could wait several meetings between rate cuts, Lagarde says

European Central Bank interest rates are not on a linear downwards path and policymakers could at times wait more than one meeting before cutting them again, ECB President Christine Lagarde said in a newspaper interview.

The ECB cut rates from a record high last week but held off committing to any more policy easing given stubbornly high wage growth and yet another increase in inflation projections.

“We’ve made the appropriate decision, but it doesn’t mean interest rates are on a linear declining path,” Lagarde told several major European newspapers in a joint interview.

“There might be periods where we hold rates again,” Expansión, Handelsblatt, Il Sole 24 Ore and Les Échos all quoted her as saying on Monday.

When asked if this meant the ECB could hold rates for longer than a single meeting, she said “it’s a possibility”.

Markets now expect little more than one rate cut over the four meetings left this year and see between 3 and 4 reductions through the end of 2025, so in the next 12 policy meetings.

While Lagarde did not explicitly say the ECB would hold interest rates at their current level in July, she argued that further cuts depended on a slew of wage and corporate profit indicators, which only become available in the run up to the bank’s September meeting.

“We will need more data, including on wages, on how unit profits are growing and absorbing part of the labour costs, and on productivity,” she said.

ECB board member Isabel Schnabel and Slovak policymaker Peter Kazimir have both said the ECB should not cut rates again next month while many others speaking in private have made the same argument.

Still, Lagarde argued against explicit commentary given uncertainty and likely bumps in the path of inflation.

“Forward guidance has not been helpful,” Lagarde said. “Time-dependent guidance is currently not helpful.”
Source: Reuters (Reporting by Balazs Koranyi; Editing by Kirsten Donovan)

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