There European Central Bank has chosen to reduce Once again Interest rateslowering them by 25 basis points in the first meeting of 2025. Christine Lagardepresident of the Institute, he justified the move with an still uncertain economic framework and answered the press questions, touching the key points of the moment.
This new scissoring scores The fifth cutting of consecutive rates in the current monetary eases cycle. The rate on deposits drops from 3% to 2.75%, the one on the main refinancing falls to 2.90% and the rate on marginal loans is reduced to 3.15%. In short, the ECB continues its adjustment strategy with the aim of supporting the economy, still struggling with a weak growth and weak consumption.
Inflation and economic growth: the dynamics in progress
Christine Lagarde goes on with the usual French pragmatism that characterizes it: Prices will not move much in the short term. “Inflation will float around current levels in the next period,” he says, while long -term expectations remain anchored to 2%.
But if the prices remain still, the growth does not seem neither start. “The risks for economic expansion remain oriented down,” warns the president of the ECB, focusing on the finger on the turbulence of global trade. “An increase in friction in international exchanges could weigh on the growth of the eurozone”, an elegant way to say that The recovery is a mirage.
The eurozone, in fact, is bogged down. “THE’Economy is in stagnation in the fourth quarter And he will remain weak in the short term, “explains Lagarde. “The manufacture is in contraction, the services expand, but the trust of consumers deteriorates and the expense of families does not go up.” Despite the slightly encouraging picture, the number one of the ECB clings to a mantra: “The conditions for the recovery remain”. But when?
Factors that influence inflation and recovery
The ECB analyzes a series of factors that are keeping inflation in check. On the one hand, there are Elements that could push prices upwards: “Wages, profits and geopolitical tensions”. On the other, a limping economic trust and international instability could dampen the inflationary dynamic. “Tensions in global trade would make the most uncertain inflationary outlook,” Lagarde warned.
In the official press release we read that “the unfruption process is well started” and that the prices are moving “in line with the projections”, with a return to 2% expected within the year. There wage growth is slowing downwhile the profit margins are partially absorbing the effects of inflation. Cooling signals, but without illusions: the ECB knows that the balance remains fragile.
Trend of the production sectors and signs of recovery
The eurozone proceeds at double speed. “The manufacturing industry continues to contract, while the services are expanding,” explained Lagarde. The labor market, for now, holds, but but It is not a guarantee of recovery. “If commercial tensions do not worsen, exports could support the recovery with the growth of global demand”, a hypothesis that sounds more like a hope than a certainty.
Frankfurt warns: “The financing conditions continue to be rigid, also because monetary policy remains restrictive and the past raises of the rates are still transmitting to the existing credits”. The money still costs dear and the effects of the past passed have not been exhausted. Despite this, the ECB bets on a Loor of financial pressure: “The increase in real income and the gradual to fail the effects of restrictive monetary policy should support a growth in demand over time”. But the conditional remains a must.
Financial markets and interest rates: the moves of the ECB
THE bond returns rise And not only in Europe. “The increase in returns is a global process, influenced by the United States,” explained Lagarde. But, he assures, the narrow is not blocking the transmission of monetary policy. The ECB remains under observation, without unbalanced on When the cutting of the rates could stop.
On neutral interest rates, Lagarde has liquidated the question: “The debate is premature”. No indication on the next moves, no signal on a possible drop below the neutral level. “The rhythm and amplitude of the cuts will depend on the economic data,” he reiterated. For now, navigation on sight.
On Crypto asset, Lagarde does not leave spiragli: “I am confident that Bitcoin will not be part of the reserves of any of the central banks of the European Union”. The reserves, he underlines, must be “liquid, safe and sheltered from suspicions of recycling or criminal activities”. In short, the cryptocurrencies remain outside the ECB games, but not the banks.