However, Central Bank President Christine Lagarde is likely to signal a rate cut for June. It would be the fifth time in a row that the central bank has not changed interest rates.
Many analysts expect that the currently crucial deposit rate will initially remain at 4.0 percent. The main refinancing rate, which has been less important for a long time, is 4.5 percentage points.
Inflation rate fell to 2.4 percent in March
The ECB had raised its interest rates sharply in the fight against high inflation. However, inflation in the Eurozone has recently fallen further. In March the inflation rate fell to 2.4 percent. In autumn 2022 it reached a record high of 10.7 percent. The central bank is aiming for a rate of 2.0 percent in the medium term.
Despite the decline in inflation, experts expect a first rate cut only at the next meeting on June 6th. “The majority in the ECB Council will probably want to wait until June, because then not only will the new projections from the ECB experts be available, but the wage indicators that are currently important for the central bankers will then cover almost the first half of the year,” says Commerzbank in an outlook . ECB President Lagarde also stated this several times at the previous press conference. We will know “a little more” in April, but “significantly more” in June.
“In the run-up to this ECB Council meeting, some members indicated that they wanted to discuss the start of key interest rate cuts,” write the Dekabank experts in an outlook. However, the ECB will probably postpone a decision until the next meeting, as it will then have a more comprehensive data basis.
Little doubt
There is currently little doubt in the markets that the ECB will cut interest rates in June. Lagarde repeatedly emphasizes that the approach will be data-dependent. However, the central bank usually tries not to surprise the markets. “At the press conference, President Lagarde should indicate that the hurdles for a first interest rate step are not high, but that the subsequent pace of monetary policy easing will depend on the development of the data,” expect the experts at Dekabank.
This shows that the ECB is cutting interest rates before the US Federal Reserve. In view of the robust economy and the stable labor market in the USA, there are now even voices from the Fed that are questioning interest rate cuts this year. In the Eurozone, on the other hand, the economy is weakening, especially in Germany. This should make it easier for the ECB to cut interest rates in June.
