ECB’s Lagarde: ‘Long Enough’ Excludes Interest Rate Cuts During Next Two Quarters

10 November 2023

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Friday ruled out interest rate cuts during the next two quarters.

During an on-stage interview at the Financial Times Global Boardroom conference, Lagarde said that the phrase ‘long enough’ in reference to the necessary duration of restrictive monetary policy is ‘not something that is, you know, in the next couple of quarters we’ll be seeing a change.’

Given the criteria relied on by the ECB to assess the appropriateness of its stance, ‘“long enough” has to be long enough’, she said.

The view that price stability now depended on duration rather than level assumed the absence of any new ‘major shocks’, she underlined. Were any to occur, then ‘depending on the nature of the shocks, we will have to revisit that statement’, she said.

As for how long long enough was, ‘for that we are going to be data-dependent’, she said.

With regard to October’s unexpectedly low HICP, ‘We should not assume this 2.9% respectable headline rate can be taken for granted’, she said. ‘Even if energy prices were to remain where they are, there will be a resurgence of probably higher numbers going forward and we should be expecting that.’