possible rate cut in June

Christine Lagarde already sees the finish line of victory over inflationsupported by the data published in recent days, which confirm slowing price growth towards the long-term goal of 2%.

“I think that rates, barring further shocks or unexpected data, will not continue to rise,” said the head of the ECB in an interview with France 2 TV, confirming that the rates have reached a peak. “And if we win our fight against inflation – he added – and if we are certain that inflation will actually be at 2%, at that point rates will start to go down”.

No certain date

“I can’t give you a date”Lagarde said to a specific question on the topic, adding “I can say that if we win this battle, if we arrive to 2% as we estimate in 2025and if it is confirmed by the data we will have” in the coming months, “then the rates will increase and begin to decline as we have this certainty”.

But what makes Lagarde so optimistic?

The latest inflation data has yielded Lagarde very confident on a return to inflation. Last week Eurostat confirmed that trend growth has stood at 2.9% in Decembera very slight increase compared to the 2.4% of the previous month, but below the expectations of analysts who estimated a +3% of consensus. Core inflation – which excludes energy, food and tobacco – is also estimated to slow to 3.4%, compared to 3.6% in the previous month and the +3.5% of the consensus. An increase that “don’t worry” Intesa Sanpaolo analysts, according to which it represents “only a hiccup towards the 2% objective, due to unfavorable base effects on the energy component”.
Data confirmed by the trend ofinflation in Francewhich confirms 3.7% on a trend basis against +3.4% in the previous month, and in Spainwhich marks growth by 3.1%, in line with the preliminary estimate and consensus and decelerating compared to +3.2% in November

For once Europe is better than the USA

There situation of inflation in the EU certainly is better than the USA, where the data published yesterday represented a cold shower for the most optimistic. Inflation in United States in fact he accelerated again, pushing himself up to 3.4% against the +3.2% of the consensus, after reporting a 3.1% expansion in November. The energy index fell 2% in the 12 months ending in December, while the food index increased by 2.7% in the last year. The “core” rate, i.e. the consumer price index stripped of the most volatile components such as food and energy, most closely monitored by the Fed, recorded an increase of 3.9%, from +4% in November and against +3 .8% estimated by analysts.

Caution is a “must”

The ECB Bulletin published yesterday confirms that i bankers predict inflation that will fluctuate between 2.5% and 3% for much of this year. This will imply a prudent monetary policy, which will take into account inflation data and also wage growth, although data on payroll growth for the first quarter will only be available in May. Hence the prediction of one first action on rates no earlier than May-Junewhich belies market expectations, which were betting on five rate cuts this year and a first move in March-April.