From the minutes of the last meeting of the European Central Bank (ECB), which was held in early March, it appears that members of the Governing Council are starting to see arguments in favor of considering a decline in interest rates. As can be seen from the summary of what was decided on 6 and 7 March, the ECB advisors recognized that, “although it was prudent to wait for data and evidence, the reasons for considering a rate cut had strengthened”.
The latest ones supported this opinion during the meeting macroeconomic projections from ECB expertswho see a improvement in inflation forecasts it’s a worsening of growthas well as new advances in the three criteria identified by the Governing Council in 2023 and a more balanced risk assessment.
ECB policy must remain data-driven
However, the members of the Governing Council stressed the need for ECB policies to remain data-driven and on the elements of the institution’s reaction function. As a result, all members agreed with the proposal of the ECB’s chief economist, Philip Lane, to keep interest rates unchangedwhile there was consensus that it would be premature to discuss rate cuts at the March meeting.
Rate cut, more information in June
In the press conference following the ECB Governing Council meeting, President Christine Lagarde underlined that the ongoing disinflation process in the eurozone offers greater confidence, “but not enough,” adding that even if there won’t be a little more information in April, there will be “a lot more in June.” Lagarde also wanted to clarify that at the March meeting there was no discussion of lowering rates and that the governing body has only just begun to discuss the adjustment of its restrictive policy.
As underlined in the March Governing Council meeting, “in addition to the new macro projections of the ECB staff, the Governing Council will have much more data and information available by the June meeting, especially on wage dynamics. On the contrary, the new information available in time for the April meeting would be much more limited, making it more difficult to have sufficient confidence in the sustainability of the disinflation process by then.”
If not imminent, the expected cut in interest rates by the European Central Bank could be close. And June could prove to be the key month. Moreover, if we look overseas, the Federal Reserve made a prediction at its last meeting, while leaving rates unchanged in 2024 three cuts in the cost of borrowingfor a total of 75 basis points.
