ECB President: "June Rate Cut Likely... Confident in Inflation Control"

Plans for Interest Rate Cuts After June "Difficult to Predict"

Christine Lagarde, President of the European Central Bank (ECB), expressed confidence that the current inflation is under control and indicated a high possibility of a rate cut next month.

On the 21st (local time), President Lagarde made these remarks in an interview with Irish broadcaster RTE.

Christine Lagarde, President of the European Central Bank (ECB)
[Photo by Yonhap News]

President Lagarde said, "I am confident that inflation is under control," adding, "If the data strengthens confidence that the inflation target of 2% will be achieved in the medium term, there is a high possibility of a (rate cut) action on June 6." She further stated, "Even if the forecasts for next year and the year after do not reach the target (inflation 2%), they are getting closer to the target."

If the ECB implements a rate cut in June, it will be the first time in about two years that the ECB lowers rates before the United States. The current ECB key interest rate is 4.5%, and it is expected to be cut by 0.25 percentage points in June. The market expects the ECB to follow up with additional rate cuts in September and December.

However, President Lagarde drew a line on plans for subsequent rate cuts, saying she could not confirm them. She said, "We have to rely on the data," and added, "It is very difficult to define or predict the path after the first cut."

Joachim Nagel, President of Germany's central bank Bundesbank, also agreed with the prospect of a rate cut in June in an interview with the German media Handelsblatt but cautioned about the path thereafter. President Nagel said, "Even if rates are cut for the first time in June, it does not mean that rates will be cut further at subsequent meetings," adding, "We must not jeopardize what we have achieved by rushing to lower rates. Uncertainty remains high."

Eurozone inflation has recently slowed but only recorded 2.4% in April. Bloomberg News analyzed that it will likely take until the second half of next year for inflation to retreat to the ECB's target level of 2%. President Lagarde emphasized, "My goal is to reduce inflation to 2%, 2%, 2%."