FRANKFURT (Reuters) – The European Central Bank (ECB) cannot commit to a predefined number of interest rate cuts, even after starting to reduce borrowing costs, because the decision will depend on available data, declared Christine Lagarde, president of the institution, on Wednesday.
“Our decisions will have to continue to be data-driven and to be made in meetings, based on new information that comes to us,” she said at a conference in Frankfurt.
“This implies that, even after the first rate cut, we cannot commit in advance to a particular rate path,” she added.
Many ECB officials have expressed support for a first cut in interest rates, probably in June, given the decline in inflation, which fell to 2.6% year-on-year in February in the euro zone. The debate now focuses on the cumulative number of reductions that will follow.
Christine Lagarde clarified on Wednesday the conditions necessary for the ECB to start reducing its rates: a slowdown in wage growth, a continued fall in inflation and new internal projections confirming that price growth returns to the target of 2%.
“If these data reveal a sufficient degree of alignment between the underlying inflation path and our projections, and assuming that transmission [de la politique monétaire, NDLR] remains strong, we will be able to move on to the reduction phase of our monetary policy cycle and make our policy less restrictive,” said Christine Lagarde.
(Reporting Francesco Canepa and Balazs Koranyi, Augustin Turpin, edited by Blandine Hénault)
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