At her subsequent press conference,ECBPresident ChristineLagardeall but ruled out a cut at the bank’s next policy meeting in April, saying the bank still wouldn’t have all the information it needed to be “confident” that inflation is returning sustainably to target.
While the eurozone’s headline inflation has eased to 2.6 percent as of February,Lagardenoted that services inflation was still running at 3.9 percent, with a nod to what she called “robust wage growth” and weak productivity.
“Since theECBhas been setting interest rates for the eurozone, it has lowered them 21 times, and never when core inflation was above 2.2 percent,” said S&P Global Ratings economist Sylvain Broyer. “Today, core inflation stands at 3.1 percent and will not fall below 2.2 percent before the summer.” With that in mind, he argued, June is the likeliest date for a first cut.
Friedrich Heinemann, an economist with the ZEW think-tank in Mannheim, agreed that the “surprisingly” strong drop in inflation and “poor economic data” boost the chances for a rate cut in June.
ECBstaff now expect inflation to hit, or even slightly undershoot, the 2 percent target in both 2025 and 2026, which is generally seen as the relevant horizon for policy. For 2024 the inflation forecast was cut to 2.3 percent, from 2.7 percent in December.
Core inflation, which strips out energy and food prices, is expected to come in only fractionally higher than the headline number, averaging 2.6 percent in 2024, 2.1 percent in 2025 and 2.0 percent in 2026.
