Lagarde confirms ECB rate cut in the short term (barring sudden ‘shocks’) — idealista/news

The president of the European Central Bank, Christine Lagarde, has assured that the institution she leads will respect the roadmap which includes cutting short-term interest rates, unless some type of sudden and significant shock occurs.

“We are observing a disinflationary process that is progressing according to our expectations,” Lagarde said in statements to CNBC on the sidelines of the spring meetings of the International Monetary Fund (IMF) and which were reported by the Europa Press agency.

“We just need to build a little more confidence in this disinflationary process, but if it moves as we expect, if we don’t get a big ‘shock,’ we are heading towards a time when we will have to moderate restrictive monetary policy [ …] in a reasonably short period of time,” said the former French Minister of Economy and Finance.

However, Lagarde reminded that the ECB has not “pre-committed” to any rate path, so lowering the price of money in June does not imply that it will continue to be cut thereafter. Indeed, during its April meeting, the Eurozone’s highest monetary and financial authority left the door open to a rate cut in June, although it did not confirm such a move, and insisted that its decisions will be based on economic data .

“There is huge uncertainty out there. We have to be attentive to these developments, we have to look at the data, we have to draw conclusions from that data,” he explained. Lagarde indicated that the recent increase in raw material prices “has an impact” on inflation, so the ECB will be “extremely attentive” to its evolution. “Evidently they have a direct and rapid impact on energy and food”, he specified. The price of money has remained at 4.5% since September last year, the highest level since 2001.

The Fed, ready to maintain rates if inflation takes hold

The president of the US Federal Reserve (Fed), Jerome Powell, has warned that the institution he presides over is willing to keep its restrictive monetary policy unchanged in the face of the strength of the labor market and the entrenchment of inflation.

“If rising inflation persists, we can maintain the current level of restriction for as long as necessary . At the same time, we have ample room to ease monetary policy if the labor market weakens unexpectedly,” Powell told a U.S.-Canada economic forum in remarks reported by Europa Press.

Furthermore, he specified that the latest inflation data do not give the North American issuing institution greater confidence that it is converging in a lasting way with the 2% objective and that, on the contrary, they suggest that is “probable” that It will take longer than expected to reach that level of certainty.

The head of US monetary policy declared that, considering the progress achieved previously in terms of inflation and the good performance of the labor market, which has already recorded an unemployment rate below 4% for 26 consecutive months, “it is appropriate to give more time to restrictions and let evolving data and insights guide us.

In any case, Powell assured that the performance of the American economy in the last year has been “very good” thanks to an improvement on the supply side which has favored both aggregate demand and employment. This process would have coincided with a moderation in inflation, but, as noted, the cooling in prices would have stopped in early 2024.