ECB’s Lagarde: ‘Might Be Periods Where We Hold Rates Again’; Could Be More Than One Meeting

11 June 2024

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Tuesday said the ECB could put its monetary policy easing on pause for more than one Governing Council meeting.

In an interview with major European dailies Expansión, Handelsblatt, Il Sole 24 Ore and Les Echos, the text of which was also posted on the website of the ECB, Lagarde sidestepped the question of whether the ECB could stop cutting rates after one cut without jeopardising its credibility, saying that ‘we’re still in restrictive territory and we have to continue as long as necessary’.

Last week’s cut reflected the sentiment that ‘disinflation was sufficiently advanced and would continue to progress over the next 18 months’, she explained. ‘But we’re not on a predetermined path. At every step of the way, not only when we have new projections, we will reassess.’

Still, she insisted, the decision to cut was ‘appropriate’, even if it was not the start of a ‘linear declining path’ for interest rates. ‘There might be periods where we hold rates again.’

Those periods could exceed one Council meeting, she said.

The ECB would have to follow wage, unit profits and productivity developments, as these were important for ‘our weak spot’, services inflation, she said.

Forward guidance on rates ‘has not been helpful’ and was not realistic under very high uncertainty, she said. ‘Then you’re tying your hands – and in the meantime there’s wind and waves all over the boat and you can’t bring the sail in’, she said.