“We think in quarters from a macro perspective, so I wouldn’t overanalyze April versus June,” Lane told CNBC on Thursday. ECB Council member Klaas Knot is expecting a turnaround in interest rates in the euro area in June.
In the second quarter, the ECB will have progressed far enough into 2024 to learn more about wage dynamics and more about price pressures: “We will know a little more by April, we will know a lot more by June.” A calendar-based orientation for the financial markets must be avoided. The ECB’s next interest rate meetings are scheduled for April 11th and June 6th in Frankfurt.
It is important that the initial transition away from preservation and towards a reduction in restrictive orientation succeeds, said Lane. After the interest rate meeting last Thursday, ECB President Christine Lagarde signaled that the monetary authorities would probably lower the key rates in June rather than April.
Interest rate turnaround in June
Council member Knot, however, expects a turnaround in interest rates in the euro area in June. The Dutch central bank chief told the press on Thursday that he personally had his eye on a first interest rate cut this month. There is still a lot of data to look at – for example on wage growth and productivity growth. “First quarter data will be available in May. It will be important to wait for this data before cutting rates,” he added.
How interest rates continue in the second half of the year also depends on the data. He is therefore focusing on the meetings in September and December, when the ECB presents new economic projections.
Inflation in the euro area last weakened to 2.6 percent in February from 2.8 percent in January and 2.9 percent in December. The Euro Central Bank is targeting 2.0 percent inflation as the optimal level for the 20-country community.
