This is a media release that will please borrowers who have seen the cost of their debt rise due to tightening monetary policy. In an interview with Bloomberg Television in Davos, Christine Lagarde was asked about the hypothesis that a majority of ECB Governing Council members will decide to cut rates this summer or by summer. ” I would also say that it is also possible “, declared Christine Lagarde. A response so far loaded with significance, the president of the euro’s guardian refused to talk about a possible future reduction.
As a reminder, the ECB embarked on an unprecedented cycle of raising interest rates, with ten consecutive hikes, bringing them from 0%, to combat inflation caused by the rise in energy prices following Russia’s invasion of Ukraine. 4 and 4.75% from 2022, before pausing in October.
AlsoInvestors are now betting on rate easing from spring. The money market is currently forecasting a decline of 150 basis points in the full year.
Falling inflation “on track”
And for good reason: Inflation, which was above 10% in the summer of 2022, was 2.9% in December in the euro zone. If December saw a slight rebound after November’s 2.4%, Christine Lagarde nevertheless confirmed that inflation “On the Right Track”But it was too early to declare victory. In the euro zone, the ECB is actually counting on growth of 2.7% in 2024, 2.1% in 2025, then 1.9% in 2026.
“Pressures have clearly returned to underlying trends, particularly commodity prices, In fact, in an interview with La Tribune this Wednesday, Christophe Beraud, Chief Economist of Market Securities, confirmed. Inflation will move towards the ECB target of 2% by the third quarter. China is in the phase of deflation. Despite rising freight costs, this deflation from China helps offset the recent rise in inflation.”
However, one element may continue to weigh on prices, pushing them forward: Wages: “ Employees have lost purchasing power during 2021 and 2022 and the impact is being seen in the negotiations taking place now. “Christine Lagarde explained. In order to compensate for inflation, wage increases are being negotiated in companies and administrations in the euro zone, under the caution of the ECB, which is awaited ” To find out more (…) in April or May » To decide on the possible easing of its monetary policy, the president of the organization explained.
Risk of going too fast
” But I have to be reserved, because we also say that we are dependent on the data and there is still a level of uncertainty and certain indicators that are not anchored at the level where we would like to see them. “, she deserves. Interest rates certainly ” the top “, but” We should maintain a restrictive policy as long as necessary to ensure that we reach a state where inflation does not exceed 2% in the medium term. “
” The danger may be that we move too quickly and have to go back to more austerity, because we would have ruined the efforts that everyone has made in the last fifteen months. “, she warned.
A speech that supports it Philip Lane, ECB’s Chief Economist. ” Once we gain enough confidence in our ability to achieve our 2% inflation target, the issue of rate cuts will come up. But for now, we only have guesses, and we’ll have to wait for new data to be published before going any further. “, he said during a conference in Dublin, Ireland on January 14.
(with AFP)
