ECB Insight: Lagarde Confirms That June Meeting the One to Watch: ‘We Will Know a Lot More in June’

7 March 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Thursday delivered a performance in line with the largest part of Governing Council members’ communication in recent weeks pointing to June as being the likeliest start of monetary policy easing.

She abandoned her previous characterisation of rate talk cut as premature, switching instead to the initially ambiguous assertion that ‘we have not discussed rate cuts for this meeting, not, full stop.’

What she evidently meant by ‘for this meeting’ was simply that the Council had not considered the possibility of cutting rates immediately, which no one had expected anyway.

We see this interpretation as having been confirmed by her subsequent words: ‘What we have done is that we have just begun - just begun - discussing the dialling back of our restrictive stance’, she said. ‘But of course, we need a lot more information coming in in the next few months to be sufficiently confident.’

As the ECB’s currently restrictive stance will be loosened via a reduction of interest rates, its primary tool, it is clear that rate cuts in general terms were in fact on the Governing Council’s mind today. Unfortunately, she was not pressed for details, and as the ECB wants to approach the matter cautiously, Lagarde was happy to take advantage of this circumstance and not provide any.

Indeed, we note, even the question that prompted this revelation came towards the end of the press conference, suggesting that she would have been happier yet skirting the issue entirely. But again, that reflects the cautiousness of the ECB, which only relatively recently found itself of a mind with financial markets with respect to the prospects for policy easing.

That fact, too, she confirmed today, somewhat reluctantly. ‘I just note that it seems to be converging better, but everyone has to do their job’, she said of the market repricing.

If we were to highlight one section of her performance as a summary of where things stand, however, we would refer to the beginning of the press conference, when she confirmed that ‘there is a definite [inflation] decline which is underway, and we are making good progress towards our inflation target.'

‘And we are more confident as a result, but we are not sufficiently confident, and we clearly need more evidence, more data, and we know that this data will come in the next few months’, she continued. ‘We will know a little more in April, but we will know a lot more in June. So, this is really what we have determined during our discussion this morning.’

It is not hard to understand what is meant by this, given how consistent it is with public and private statements by a wide range of monetary authorities in recent weeks. Namely, the ECB thinks June is the most promising candidate for the first rate cut, April being too early, given the importance of wage data that won’t be available yet then.

Still, Lagarde at no point took April completely off the table, any more than she explicitly said ‘June’ and ‘rate cut’ in the same breath. That would have been inconsistent with the data-driven, meeting-by-meeting approach under conditions of high uncertainty, all of which argue for exactly the sort of language she relied on.

And yet, if anyone doubted previously that the 6 June Governing Council meeting was the one to watch, Lagarde effectively put those doubts to rest.