ECB Insight: Lagarde, as Data-Dependent as It Gets, Scrupulously Avoids Hints on Timing of Future Moves

6 June 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Thursday succeeded in leaving even more uncertain than might have been expected the timing of any further interest rate cuts, though without undermining the idea that more monetary policy easing would be coming as the disinflation process continued and wages ultimately softened.

Speaking at the press conference following the Governing Council meeting at which policymakers decided to cut rates by 25bp, Lagarde assiduously avoided any surprises of her own making, though with the advantage of a Council behind her that, as she reported, had been ‘absolutely united to decide that our path would be data-dependent, to decide meeting by meeting, and there was absolutely no dissent on that front.’

Still, there had been a lone holdout with respect to today’s decision to cut rates by 25bp, she said, without specifying whether it had been someone who wanted to do more or someone advocating less. We imagine that it was someone like Bank of Portugal Governor Mário Centeno preferring a larger step, given no governor had expressed opposition to the idea of cutting in general.

In any case, there are scarcely major implications of there having been one lone Council member who felt strongly enough that the ECB should have reached a different conclusion to ruin Lagarde’s treasured unanimity and go on the record – at least internally, for the time being - as the opposition of the moment.

Lagarde’s attitude in any case was more amused than bitter, and she radiated contentment as she shared that the increase in confidence undergirding today’s cut reflected the newfound ‘reliability and solidity and yes, robustness’ of the ECB’s forecasts. In this context, she highlighted the stability of the inflation outlook for the last quarter of 2025 over recent projection exercises.

If some key parts of previous rhetoric warranted no substantive change – for example, the promise to ‘keep policy rates sufficiently restrictive for as long as necessary’ – there was no overlooking the importance going forward of data, hitherto often the recipient of lip service but today apparently enjoying unquestioned supremacy.

‘We shall be data-dependent, and we shall decide meeting by meeting’, she said. ‘The only thing I’m telling you is we need sufficient data.’

That went so far as to include a refusal – subsequently tempered - to agree that the ECB is now in what she has previously called a ‘dialling-back phase’.

‘I cannot confirm that it is the dialling process that is underway’, she said. ‘There’s a strong likelihood, but it will be data-dependent.’

And yet, she wove into the repeated paeans to incoming information expressions of confidence in developments that left no room for any doubt about where the journey is going.

‘We know the path we are on, but we also know there will be other bumps on the road’, she affirmed, for example. Or, with regard to wages, she asserted that these were in the process of weakening, and that next year this would become much clearer.

All in all, Lagarde avoided more scrupulously than one would have previously thought possible any hint as to what would come when. Of course, in doing so, as she indicated she realised, she was laying the groundwork for others to provide such guidance, as they surely will.

At Econostream, we continue to regard sceptically the likelihood of a July rate cut, and don’t think the advocacy of one dove – if that’s what it was – should be taken as an indication of a greater probability. Even if that may have been the renitent Council member’s objective.