To new Reduce interest rates by 25 basis points The European Central Bank (ECB) proceeded on Thursday. It was the sixth consecutive reduction since last June. The main criterion for marking monetary policy by the ECB, according to its statutes, is the stability of the price, that is, the maintenance of inflation around 2%. As inflationary pressures are receding today, inflation in the eurozone stabilizes 2.4% (nothing to do with 10.7% in 2022), the “guardians” of the single European currency ruled that it was time for a new interest rate reduction.

As the ECB leader explains Christine Lagarde “In particular, our decision on the Deposit Facility Rate is based on the updated evaluation of inflation, the dynamics of underlying inflation and the intensity of the monetary policy transmission mechanism. (…) Inflation evolves as expected and the latest forecasts are largely coincided with previous prospects for inflation? “

Next move in April?

The “reasonable” reduction by 25 basis points was rather expected. However, some analysts were expecting a more “brave” move, for example a decrease of 50 basis points, with a medium -term prospect of receiving the basic interest rate in the 1% region by the end of the year. Many estimate that Frankfurt will make a new move at the next meeting of ECBApril.

But there is the other view. Recently, Isabelle Snabel, a member of the ECB’s Executive Committee, speaking to the Financial Times, estimated that it was time to “take a break or stop” interest rates. It is obvious that Snabel is listening to some “bells” of a future crisis, which could be triggered either a trade war on the initiative of US President Donald Trump or an over -indebtedness of the big Eurozone finances in the rationale of the new “Whatever” Mertz (with German bond yields launched at the highest levels since March 2023 in the coming hours).

Geopolitical “shadows” in the ECB

Christine Lagarde herself speaks of “increasing uncertainty” conditions, which requires decisions on the next steps on the monetary policy “from meeting to a meeting” (ie without clear long -term horizon), based on the data available. The ECB leader, however, points out, indirectly but clearly, that in one way or another the latest geopolitical turmoil can affect economic developments.

“An increase in defense spending or infrastructure can contribute to economic growth,” says Christine Lagarde. “Frying in world trade exacerbate the uncertainty about predicting inflation in the eurozone. A general escalation of trade duties could lead to the devaluation of the euro and increased imports, which would cause new inflationary pressures … “.

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