ECB towards rate cut in 2024. Lagarde: “Expectations too optimistic”

A ECB interest rate cut in 2024 it is “probable” but not guaranteed. Some representatives of the Frankfurt Institute, including the President, reiterated this today Christine Lagarde, from the World Economic Forum in Davos. A mantra that has become more insistent in recent times, due to uncertainties to which the global economy is exposed reflections of widespread conflicts in Eastern Europe and the Middle East, the latest of which in Yemen, risk having effects on the trend of inflation.

Lagarde: market expectations don’t help

The President of the ECB Christine Lagardeinterviewed by Bloomberg in Davos, declared that a rate cut by the summer “It’s also probable”but “I must be cautiousbecause we are also saying that we are dependent on data and that there is still a level of uncertainty and some indicators are not anchored at the level where we would like to see them.”

It doesn’t help our fight against inflation – he warned – if the anticipation is such that it is too high compared to what will probably happen”.

The ECB chief then joined other members of the ECB Board in an attempt to dampen expectations of an imminent easing of monetary policy and said “we generally agree with the decisions we make based on the data”. Then, Lagarde explained that we need to wait for “late spring” when the ECB will receive data on wage growth deduced from the renewal of collective agreements, which could give an indication of where family incomes and therefore inflation are going.

Knot (Netherlands): market expectations on “self-defeating” rates

For the banker Klaas Knot, President of the Dutch Central Bank and member of the Eurotower Board, le market expectations, who see a probable rate cut as early as March, “they are going too far.”

Speaking to CNBC, as part of the Davos Forum, the banker explained “the problem for us is that in the end this it could become counterproductive“. “We are optimistic that we have a credible prospect of inflation returning to 2% in 2025. – he reiterated – But many things still need to go right for this to happen.”

“At the basis of this projection – he concluded – there is an alleged path of interest rates, which contains an easing significantly less than that currently incorporated in market prices, therefore this risks becoming self-harming“.

Simkus (Lithuania): “less optimistic” than the markets

Gediminas SimkusLithuania’s central bank governor said he was “optimistic” about possible rate cuts this year, but said he was “much less optimistic than markets about rate cuts in March or April”.

“We are generally in line with our expectations as we see large-scale disinflation. But growth salary is still double the average long term,” warned the banker, recalling that the next wage data will be “very important”.