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Possible reduction of interest rates in June

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Possible reduction of interest rates in June

    Next Thursday, the Governing Council of the European Central Bank (ECB) will convene to discuss monetary policy, and the contentious question will be whether the prospect of interest rate reduction will be formally addressed this time.

    The last time interest rates were raised was in September, marking the end of the upward cycle that began in July 2022, with the deposit rate reaching 4%.

    In the subsequent three meetings, the ECB consistently reiterated that interest rates would remain steady for a significant period to contribute to steady inflation reduction, deeming any discussion of loosening monetary policy premature.

    Christine Lagarde, the head of the central bank, along with other officials, emphasized concurrently that they must be assured that inflation will move towards the target and there is no risk of its resurgence before they proceed with a policy change.

    They primarily linked this assurance to data on the outcomes of collective wage agreements in the first quarter of 2024, from which they can gain a good indication of whether further price de-escalation will be sustainable.

    The discussion, however, regarding when the cycle of interest rate cuts will commence has been ongoing for some time, with statements from members of the ECB’s Governing Council in the media.

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