2024-07-21 12:13:11
As G. Šimkus emphasized, the perspective of the development of the interest rate should coincide with the positive market expectations related to the meetings of the Governing Council of the ECB to be held in September and December. “I have no doubts that the issue of reduction will be on the table and will be considered very seriously,” said G. Šimkus.
“The data should make it unpleasantly surprising that such a decision would no longer be considered or would be unlikely in September,” he said.
According to the head of the LB, economic indicators show consistent disinflation, which will be an important factor in the ECB’s decision to cut interest rates. In addition, according to his assessment, the positive expectations of the markets soften the monetary policy even now – “the markets see, expect and already count on the softening of interest rates”.
“In September, we will have quite a lot of new information – it will be the gross domestic product number and wage information, and there will be two new inflation numbers. I think now it is very important to monitor not so much general inflation, but how net inflation, service inflation and wage inflation develop in the second half of this year and towards the end,” he highlighted.
According to G.Šimkaus, the inflation target next year is predicted to be approximately 2 percent. within limits. This target size should be established in the second half of 2025. According to him, the forecasts for 2026 foresee already 1.9 percent. average annual inflation.
“In markets that are running very strongly above expectations and are very much looking forward to that softening, that softening is already very visible.” If we compare the current six-month EURIBOR with the peak that was in the fall, it has fallen by 0.5 percentage points”, asserted G. Šimkus.
Key interest rates were left unchanged pending strong evidence that consumer price growth has stabilized enough to start cutting borrowing costs again, the ECB said on Thursday. The bank left the current rate of 3.75 percent in effect. the key deposit rate, which it cut in June for the first time after a long period of interest rate hikes to control runaway inflation.
The pause was widely expected after ECB President Christine Lagarde said policymakers would need more time to gather enough data to decide on the next course of action.
At the beginning of June, the main interest rates were 0.25 percent. The ECB’s rate cuts have also reduced borrowing costs, which had reached record highs, but the way forward remains uncertain as inflation remains volatile.
At the time, economists had already said that another rate cut could be expected this year, and emphasized that such a decision was an encouraging signal to the market, which had been expected for some time.
However, Ch. Lagarde said on Thursday that she could not commit to the interest rate cut predicted by the markets in September. According to the head of the ECB, the outcome of the next meeting is “completely open” and will depend on the latest data.
According to the data of the EU statistical service Eurostat, the annual inflation in the euro area fell to 2.5 percent in June. from the former 2.6 percent in May, while in the EU it fell from 2.7 percent. up to 2.6 percent in 2023 in June, euro zone inflation reached 6.4 percent.
At that time, Lithuania’s annual inflation reached 1 percent in June, while it reached 0.9 percent in May.
2024-07-21 12:13:11