The European Central Bank (ECB) has announced that it will keep the reference interest rates in the euro zone unchanged until June. This marks the fifth consecutive meeting where the Governing Council has chosen not to adjust the rates in order to combat inflation. Despite recent inflation data from the US, ECB President Christine Lagarde remains cautious about making any changes to monetary policy just yet.
Lagarde has emphasized the importance of managing inflation fluctuations and reducing monetary policy restrictions to ensure that it converges towards the target on a sustained basis. Some Council members are already confident enough to support a rate cut in April, while others prefer to wait for more data before making a decision.
The ECB has observed a downward trend in inflation due to lower food and goods prices, impacting company profits. Wage inflation is being contained, while only service prices remain a concern. Lagarde emphasized the importance of data and projections in managing inflation fluctuations.
Recent economic growth projections from the ECB foresee economic growth of 0.6% this year, with inflation reaching the target of 2% by next year. However, weak credit demand is expected to continue and loan rates remaining high, which may make it difficult for certain segments of society to access credit. As such, Lagarde is considering implementing her first interest rate reduction since 2019 in June in order to support economic recovery and manage inflation.
