European Central Bank President Christine Lagarde, speaking at a Bundesbank youth event, conveyed the need for prudence before making any changes to the current monetary policy. After a period of substantial tightening, Lagarde emphasized the importance of assessing the economic impact of these measures. She addressed market speculation about potential rate cuts by April, stating that it is essential to consider various factors, including wage dynamics and geopolitical developments, prior to adjusting interest rates.
Lagarde reiterated the ECB's commitment to its consumer-price growth targets, with expectations for inflation to converge with the bank's 2% objective by the second half of 2025. This message comes in the wake of yesterday's release of the ECB's account from its latest meeting, which indicated a readiness to implement further rate hikes if necessary. This position stands in contrast to some market anticipations of near-term monetary easing.
Key voices from within the ECB's ranks, including Bundesbank President Joachim Nagel and Council member Gabriel Makhlouf, have advised against premature monetary loosening and have not dismissed the possibility of future rate increases. The European Commission's recent forecast has suggested a modest economic rebound, with expectations to avoid a recession despite a contraction in Q3 and potential short-term inflationary pressures due to statistical effects.
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