2024-04-13 10:25:33
The European Central Bank (ECB) left interest rates unchanged this Thursday for the fifth consecutive time, but began to prepare the ground for a possible decrease in June if inflation continues its downward trend.
The interest rate applicable to the main refinancing operations remains at 4.5% and the interest rates applicable to the liquidity-providing facility and the deposit facility remain at 4.75% and 4.00%, respectively .
Despite maintaining interest rates at current levels, the central bank’s speech has changed and the institution is open to reducing the current restrictive level of its monetary policy if inflation continues to fall, after falling by two tenths in March. to 2.4%.
“If the updated assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission reinforces the Governing Council’s confidence that inflation is converging towards the objective in a sustained manner, it would be appropriate to reduce the current level of restrictive monetary policy”, states the statement released at the end of the meeting.
Change of course could happen in June
At a press conference, ECB leader Christine Lagarde insisted that in June there will be “more information and more data”, in addition to new economic projections, which could lead to a change of course in monetary policy.
Lagarde reiterated that the ECB’s decisions will continue to depend on data and will be taken meeting by meeting, not committing “in advance to a concrete rate trajectory”.
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The president of the central bank indicated, however, that some members of the Governing Council felt confident in starting to cut interest rates now and that the decision to leave them unchanged did not deserve unanimity.
“Some members (…) felt confident enough based on the limited data we received in April. There were just a few and they agreed to join the consensus of a very broad majority of governors who felt comfortable with the need to reinforce confidence when we receive more data in June”, explained Lagarde.
The president of the ECB also tried to distance herself from the North American Federal Reserve (Fed), by ensuring that the ECB depends on data to define its monetary policy and not on what the North American central bank does, despite considering the importance of that occurs in other countries.
Inflation accelerated in March in the USA
The ECB president’s statements were made after it was announced on Wednesday that inflation accelerated in March in the United States, which could compromise a Fed interest rate cut that was expected for June.
The ECB president also said that the origin of inflation in the United States and the euro zone was different, as was the political response or consumer dynamics, which is why the measures have been different.
Interest rates drop significantly for the first time since the start of the crisis
In this sense, Lagarde refused to speculate on possible monetary policy decisions that could be adopted by the Fed after it was confirmed that inflation in the United States rose three tenths in March, to 3.5%.
In the case of the euro zone, the ECB expects inflation to evolve “around current levels in the coming months”, which means that its fall will not be linear, but will decrease until it reaches the target of 2% next year. .
2024-04-13 10:25:33