ECB confirms rates stable at 4.5%. Lagarde: “Cuts depend on data”

There is complete silence in Frankfurt. If anyone hoped that the President of the ECB, Christine Lagarde, gave some indication on the rates, he was certainly disappointed. The members of the Board were tight-lipped and – according to the President – showed consensus on the fact that “It is premature to talk about a rate cut” Right now. So when? The number one of the Eurotower did not say it, but confirmed that everything “It will depend on the data coming in.”

Meanwhile, the ECB today confirmed interest rates at 4.5% and a gradual withdrawal of quantitative easing measures.

The reduction of inflation is priority

“We are determined to ensure that inflation returns to our target medium term of 2% in a timely manner”- said Lagarde for this reason “our future decisions will guarantee that official rates will be set at sufficiently restrictive levels for as long as necessary”.

Inflation – confirmed the President – ​​rose back to 2.9% in December, but “the rebound was weaker than expected” and it’s “the general downward trend continued”. “Inflation is expected to decline further this year – he continued – as the effects of past energy shocks, supply bottlenecks and the reopening of the post-pandemic economy fade and monetary policy becomes more restrictive will continue to weigh on demand.”

Economy stagnating but will recover

Speaking of economic situation of the Eurozone, the president explained “It is probable that the economy has recorded a stagnation in the last quarter of 2023. Incoming data continues to point to near-term weakness. However, some indicators point to a recovery of growth in the near future.

“The job market remained robust. The unemployment rate, at 6.4% in November, returned to its lowest level since the inception of the Euro.”

Geopolitical risks emerge

“THE risks to growth economic remain downwardly oriented“, said the number one of the Frankfurt Institute, referring to economic factors, such as the effects of monetary policy, the weakness of the world economy and the further slowdown in global trade.

However, Lagarde also mentioned it to the emergence of new ones geopolitical risks related to wars between Russia and Ukraine and in the Middle East.

The risks for inflation, however, are imported to the upside, and include the worsening of geopolitical tensions, especially in the Middle East, and the higher-than-expected increase in wages.

Looking forward?

“We will continue to follow a data-dependent approach to determine the appropriate level and duration of the restriction,” the Eurotower number one assured, somehow excluding the possibility of immediate rate cuts and after underlining that interest rates “are at levels which, maintained for a sufficiently long period, will provide a substantial contribution to achieving the objective”.