Tassi di interesse della banca centrale

ECB rates, when will there be the first cuts? Lagarde's response

Have the ECB's interest rates really reached their maximum level and when will there be the first cuts in the cost of money? The question is the most important at the moment, both for investors and for politicians in the Eurozone countries, now grappling with an economic weakness that risks turning into recession.
The markets are looking for valuable clues to understand not only what will happen at the next ECB meeting on 14 December – after the central bank left interest rates unchanged at 4.50% – but also when the Eurotower intends to start to cut the cost of financing.
Prudence in anticipating potential future moves dominates in Frankfurt circles.
However, Lagarde made an indicative statement about a possible date for the decrease in interest rates.
2024 will be crucial in this regard, here's why.
When will there be the first ECB rate cuts, according to Lagarde The European Central Bank will not start cutting rates at least "for the next two quarters", said the ECB president.
Lagarde told the Financial Times Global Boardroom conference on Friday that eurozone inflation can fall to the 2% target if interest rates are held at current levels "long enough." But he added: “This does not mean that in the next two quarters we will see a change.
'Long enough' must be long enough.” In summary, until the first half of 2024 it is very unlikely that the ECB will decide to intervene on the cost of money to reduce it.
Markets are now pricing in a 75% chance of a rate cut by April, up from 30% in early October.
read also Who will cut rates first? Fed, ECB, BoE in comparison Lagarde, however, warned that eurozone inflation could still recover from its recent two-year low, especially if there were another supply shock from the energy sector.
Inflation in the 20-country bloc slowed to 2.9% in October, down from a peak of 10.6% a year earlier.
However, the core index, which excludes volatile energy and food prices, remained at 4.2% – more than double the ECB's target.
Furthermore, the prospect of wider conflict in the Middle East could fuel oil prices and this is a threat being watched closely in Frankfurt.
One more reason to be very cautious about the start of an easing of monetary policy.
President Christine Lagarde explained that keeping the deposit rate at 4% and the interest rate at 4.50% should be enough to tame inflation, but officials will consider raising borrowing costs again if necessary.
read also Europe at a turning point now, growth or recession? What can happen The ECB is now more confident that current monetary settings can indeed solve the problem of high inflation.
The risk, for now, is that rates could be increased further in the short term and not the other way around.
Lagarde clarified in this regard: “If major shocks occur, depending on the nature of the shocks, we will have to revisit the issue.” Translated: raise the cost of money again.

Author: Hermes A.I.

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