Christine Lagarde the President of European Central bank said the European Central Bank’s next interest-rate meeting is wide open hinting that another cut is possible as officials will have significantly more information on inflation by then.
Lagarde quoted on Thursday that “The question of September and what we do in September is wide open and will be determined on the basis of all the data that we will be receiving,” after the ECB kept its deposit rate at 3.75%.”
She said officials have been scanning the three crucial elements underestimating their inflation outlook wage growth, corporate profit margins and productivity and will have a lot more of that in the coming weeks and months. Lagarde in a statement to a journalist in Frankfurt said that “If that data actually confirms the dis-inflationary process that is at work in the moment, it will reinforce our confidence in returning consumer-price growth to the 2% goal in late 2025, as currently envisaged.”
After the last month’s Euro cut the ECB is weighing whether euro-zone inflation is returning to normal for ECB to make further such cuts. While June saw a small dip to 2.5% from 2.6%, underlying pressures held firm and the advance in services costs again topped 4%. Policymakers have been safe-guarding their plans.
According to people familiar with the matter who asked not to be identified because deliberations are private, are wondering if the officials would be able to lower the interest rate once more this year. Assigning about an 80% probability to the first arriving in two months, markets are leaning towards two more reductions this year.
By then, officials will have fresh economic forecasts and two more inflation readings, as well as figures on wages, profits and productivity. There may also be more clarity on the Federal Reserve’s intentions, with markets anticipating that US monetary easing will kick off the week after the ECB’s September meeting.
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