ECB meeting 7 March, forecasts on rates and Lagarde's conference

The ECB meeting on Thursday 7 March could finally clear up the doubts about the first interest rate cut: forecasts in this regard are multiplying, with expectations growing especially towards Lagarde's press conference.
The question that most interests investors is only one: is the Eurotower already ready at this meeting to reduce the cost of money? Most likely not.
Most analysts agree that rates will still remain at 4.5%.
In the background, however, there are various pressures that leave the central bank worried, from the fear of a rise in prices due to geopolitical tensions to concerns about weak growth in countries with a single currency.
A small glimpse into the future will be provided at the press conference following the rate decision, along with a new set of projections for inflation and GDP.
Despite the widespread belief that nothing will happen to rates at this meeting, the reasons for following the ECB meeting on 7 March are different and crucial.
All the predictions about the meeting and Lagarde's words.
read also The credibility of the ECB hangs in the balance on inflation.
Word of the EU ECB meeting 7 March, forecasts on rate cuts With inflation falling further and the Eurozone economy remaining weak, the debate on rate cuts will be more heated than ever at the meeting on 7 March.
However, stubborn underlying inflation, particularly in services, uncertainty over wage developments and confidence in an economic recovery in the Eurozone will prevent the ECB from cutting rates this week.
This forecast summarized by ING strategist Carsten Brzeski reflects almost all analysts' estimates on the spring Eutotower meeting.
So far, the ECB has resisted rumors of an imminent decrease in the cost of money and markets now expect cuts of 90 basis points (bps) this year, compared to 150 bps at the beginning of 2024.
In this more cautious context, the majority of observers and experts predict that, once again, nothing will change on rates for the Eurozone, which are destined to remain at the record level of 4.5% also on March 7th.
“ECB spokesmen, even if they have different views on the timing, have acknowledged that rate cuts are coming,” said Jens Eisenschmidt, chief European economist at Morgan Stanley.
“The March meeting will be an opportunity to change the language of the statement to point this out.” The spring meeting is therefore framed as preparatory to the change in rates rather than itself marking the expected change.
A few months ago the markets were convinced that the March meeting would be "the right one".
But this is clearly no longer the case.
So what is likely to happen on Thursday? “Unlike previous meetings, the question of the timing of a rate cut will now be on the agenda,” Natixis ECB watcher Dirk Schumacher said in a research note.
The staff's updated projections will likely show a downward revision to inflation this year, reinforcing the signal that the bank is moving closer to a rate cut, he added.
Furthermore, given that the Eurozone economy as a whole is more resilient than thought at the end of last year, there is less pressure to cut rates quickly.
Recent PMIs (purchasing managers' index) have even shown an improvement in economic sentiment, with the services component even returning above 50, signaling an expansion for that sector, not a contraction.
And this would justify waiting – until June – to intervene on the cost of money.
Berenberg Holger Schmieding has announced that he expects an initial cut of 25 basis points at the June meeting, but not before.
“We therefore expect the ECB to wait until June for a first rate cut of 25 basis points.” read also How much will ECB rates decrease in 2024? What to expect from Lagarde's press conference? The topic of communication arouses a lot of curiosity.
According to Brzeski, in fact, the meeting could suggest that something is about to change in the assessment of inflation, opening the door to rate cuts in June: "We remember that in recent months the ECB's communication on rate cuts has gradually changed from "We didn't even write 'rate cuts' and it was too early to discuss rate cuts in January.
If the Bank were to say that members “had an initial discussion on the preconditions for rate cuts” or “we decided to start this discussion at the next meeting,” this would mark a further shift in the direction of easing monetary policy.” Attention to Lagarde's press conference will therefore be at the highest levels.
ECB economic projections: what updates? The meeting on 7 March is also crucial for the updated forecasts on GDP and inflation in the Eurozone.
Economists expect downward revisions of growth and inflation forecasts for 2024 according to indications on Reuters.
Euro area growth stood at around zero for the sixth consecutive quarter and the European Commission has just cut its GDP growth forecasts for this year to 0.8% from 1.2%.
Data late Friday showed inflation in the bloc fell to 2.6% in February from 2.8% the previous month.
“ECB inflation forecasts overall should be reduced as energy prices are around 20% lower than December macro projections,” noted Andrzej Szczepaniak, senior European economist at Nomura.
read also Inflation in Europe is falling, but not convincing.
Here's why In December, the ECB forecast GDP growth of 0.8% this year and 1.5% next year.
Inflation was estimated to be 2.7% this year and 2.1% next year.
Regarding inflation, the most important element was the forecast that it would return to 2.0% in the third quarter of 2025.
“Any downward revision of the growth profile and any signal that inflation could reach 2 % before the third quarter of next year would open the door to early rate cuts,” according to the ING strategist.
Maximum attention and caution on salaries, specially observed by Lagarde and all the members of the board.
Bloomberg Economics expects Lagarde to use downward revisions to ECB staff economists' forecasts after the next meeting on March 6-7 to set the stage for a cut, but will likely argue that policymakers cannot move until they have more data on wages.
First-quarter wage data, crucial for the ECB, will only be published in May, so June will be the first time policymakers will see enough evidence of slowing wage growth.
Analysts polled by the central bank point to moderating wage pressures from 2024 and an increase in payrolls of less than 3% in 2026, a level generally seen as consistent with the 2% inflation target.
But the picture is not clear.
One-off payments in Germany could push up wage growth again early this year and a new, more forward-looking indicator from the ECB showed that a real turning point is yet to be reached.
The ECB economic forecasts and any clarification on salary trends will therefore take on a profound significance for markets and economists.
For this reason, the meeting on March 7 promises to be truly interesting.