By Marta Vilar – WASHINGTON (Econostream) – Econostream’s ECB Tone Meter has reversed its recent hawkish uptick, with the Governing Council still in slightly hawkish territory but less firmly so, while the Executive Board has returned to neutral.

The Governing Council index dropped to +0.60 from +0.91, while the Executive Board index plunged to +0.27 from +0.58.

Policymakers this week appeared less convinced about the likelihood of an April rate hike, citing the ceasefire and the absence so far of visible second-round effects, with the shift in tone gaining traction following ECB President Christine Lagarde’s first remarks on the sidelines of the IMF Spring Meetings in Washington.

Biggest Movers of the Week: Lagarde, Schnabel and Nagel

Although the ceasefire was announced the previous week, it was only this week that the ECB Tone Meter showed an inflection point, turning notably less hawkish. The shift was led by Lagarde, who said on Tuesday that the ECB did not have a tightening bias and was “ready to move in the direction that is required,” implying a more symmetric stance than perceived by markets.

While Lagarde was among the first high-profile policymakers to explicitly reject a tightening bias, others had already been signalling ahead of her that action was unlikely to be imminent.

Croatian National Bank Governor and incoming ECB Vice President Boris Vujčić said on Monday that energy prices were “still very close to the baseline,” while current Vice President Luis de Guindos had noted already the previous week that there were no signs of an inflationary spiral. Both remarks already appeared less hawkish than the prevailing tone within the Governing Council at the time.

This week, however, a broader set of voices—including the most influential members—aligned with a less hawkish narrative. Executive Board member Isabel Schnabel, who had already said on March 27 that there was no need to rush, reiterated that the ECB was in no hurry and could “take time” to assess the shock. ECB Chief Economist Philip Lane said the April meeting would be “too early to have anything too decisive.”

One of the most notable shifts of the week came from Deutsche Bundesbank President Joachim Nagel. Having said in late March that the ECB would “probably” need to raise rates in April if conditions warranted it, Nagel this week said that inflation expectations remained well anchored and that policymakers needed to preserve optionality.

In an interview with Econostream, he went further, pushing back against the notion that the ECB should raise rates simply because markets expect it to, saying the ECB does “not have to deliver on specific expectations” for interest rates.

Dominant Themes in This Week’s Communication: Growing Reluctance to Act in April

Unlike last week, when the dominant theme was growing conviction around a more adverse scenario, this week an increasing number of policymakers signaled reluctance to act in April.

Among the more explicit voices, Bank of Slovenia Governor Primož Dolenc said that if the baseline scenario materializes, “we won’t have any interest rate hikes.” Eesti Pank Governor Madis Müller noted there was “no obvious case” for raising rates in the next meeting, while Banque de France Governor François Villeroy de Galhau described an April move as “premature.”

Central Bank of Malta Governor Alexander Demarco told Econostream that, aside from the corporate telephone survey, little new data was likely to emerge over the next two weeks that could justify a rate hike, adding that the survey would “have to really show significant price hikes coming along to require action.”