At its last meeting in June, the European Central Bank (ECB) delivered on a pre-signalled interest rate cut, reducing all its policy rates by 25 bps.
The rate cut wasn’t without controversy after core inflation reaccelerated in May to 2.9% YoY from 2.7%, and wages ticked up in Q1. The decision to ease monetary policy was further clouded by the staff forecasts, which revised up estimates for inflation and wage growth in 2024 and 2025.
The tone of the communiqué was cautious and non-committal on the future path of rate cuts. ECB President Lagarde indicated that future decisions will be data-dependent and that there will be further bumps along the inflation road towards 2%.
As such, the ECB is expected to keep its monetary policy settings unchanged in July, with the most likely window for follow-up cuts being September and December.
#ecb #europe #interestrates
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