As widely expected, the European Central Bank today left its policy rates unchanged. It revised its projections for inflation down, mainly due to a lower contribution from energy prices. Nevertheless, domestic price pressures remain high, in part owing to strong growth in wages. High interest rates continue to weigh on demand, and growth projection for 2024 have been revised down, to 0.6%.
Comments made by President Lagarde during the press conference made clear that the ECB is moving towards a rate cut. However, in order to feel “sufficiently confident” to start easing, the ECB still needs to see more data and Lagarde hinted strongly at the June meeting at the point when this would be the case.
We continue to expect the first rate cut to take place in June, followed by 25bp cuts at each meeting thereafter in 2024.
" President Lagarde highlighted several times that they ECB would have all the data needed by June, hinting strongly at the June meeting as the start of the easing cycle. "
Dr Dirk Schumacher
Head of Europe Macro Research
