Lagarde President "Must Be Based on Strong Data"
June Minutes "Some Members Express Concern"
Senior officials of the European Central Bank (ECB), which cut interest rates last month, have been repeatedly distancing themselves from expectations of additional rate cuts in July.
According to Bloomberg on the 4th (local time), ECB President Christine Lagarde said in an interview with Portuguese broadcaster RTP, "We must remain vigilant. Inflation is continuously declining, and we need to strengthen our confidence through data that we are on the path to winning the fight against inflation."
Regarding the timing of rate cuts, she said, "It can happen at any time," but added, "However, it must be based on strong data."
The ECB cut rates last month for the first time in 4 years and 9 months, ahead of the U.S. Federal Reserve (Fed). However, it appears to be slowing down additional cuts. The prevailing view is that there will be no changes at the monetary policy meeting scheduled for the 17th-18th. This is due to concerns over wage increases and heightened geopolitical tensions, despite a slight easing of inflation last month.
On the same day, Mario Centeno, Governor of the Bank of Portugal, emphasized in an interview with Portuguese media Jornal de Neg?cios that ECB policy decisions should be gradual. He also stated, "We should always focus on monetary policy in the medium term, not on what happens every month," adding, "This applies to both inflation and interest rates."
Philip Lane, ECB Chief Economist, also said during a lecture in Naples, Italy, that he is not yet convinced that Eurozone inflation has been sufficiently contained.
President Lagarde also stated at the ECB annual meeting on the 1st that more time is needed to assess the uncertainty surrounding the consumer price trajectory.
On the same day, the ECB released a summary of the minutes from the June ECB monetary policy meeting when the rate cut was implemented. The minutes stated, "Wages rose more than expected, and inflation became stickier in the services sector," and "some members argued there were reasons to keep rates unchanged." Some concerns were raised even at the time of the June rate cut. However, it is known that all members except the hawkish Robert Holzmann, Governor of the Austrian National Bank, agreed to the rate cut.
Regarding the background of this decision, it was stated, "At some point, it is necessary to make judgments based on available information, even if less decisive," and "Waiting for full numerical confirmation means cutting rates too late, which could potentially risk falling short of the target." It was also noted, "We should not overreact to one month of negative data or inflation figures."
Although Eurozone consumer prices (in 20 countries using the euro) slowed again to 2.5% in June, the ECB remains cautious about further rate cuts. Many in the market believe that two consecutive rate cuts are unlikely. However, it is expected that rates will be cut once or twice more by the end of the year. Major foreign media also view the possibility of a rate cut in September positively.
On the same day, Yanis Stournaras, Governor of the Bank of Greece, said, "At present, two additional rate cuts this year are reasonable and consistent with our forecasts."
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