While
the
next
move
from
the
ECB
is
likely
to
be
lowering
interest
rates,
any
interest
rate
cut
is
now
expected
to
come
in
June.
In
addition,
expectations
are
growing
that
while
interest
rate
cuts
are
on
their
way,
the
ECB
will
be
lowering
rates
by
a
smaller
amount
in
2024
than
had
been
previously
forecast.
For
investors,
with
the
ECB
seen
holding
rates
this
week,
instead
the
focus
will
be
on
any
clues
to
the
timing
of
that
interest
rate
cut
coming
from
the
ECB’s
updated
inflation
and
macroeconomic
outlook.
ECB
Holding
Interest
Rates
at
Record
Highs
Since
September
2023,
the
ECB
has
kept
its
key
interest
rate
–
known
as
the
main
refinancing
operations
rate
or
MRO
–
at
a
record
high
of
4.5%.
In
its
first
meeting
of
the
year on
January
25,
the
ECB’s
governing
council
decided
to
maintain
its
policy
stance,
and
did
not
give
any
hint
of
when
rate
cuts
will
happen.
But inflation
numbers
have
fallen
since that
meeting
and the
expectations
are
rising
that
the
ECB
will
be
cutting
interest
rates.
“Two
thirds
of
economists
are
now
predicting
an
interest
rate
cut
in
June
according
to
a
recent
Reuters
poll.
This
is
despite
the
ECB
commenting
at
every
available
opportunity
about
the
danger
of
resurgent
inflation”,
said
Michael
Field,
European
market
strategist
at
Morningstar.
“The
fact
of
matter
is
though
that
inflation
has
fallen
considerably
and
the
trajectory
is
still
positive.
The
MRO
stands
at
4.5%,
meaning
the
bank
has
a
lot
of
room
for
manoeuvre.
It
can
implement
a
small
cut
in
June,
and
wait
to
see
the
effects,
without
upsetting
the
applecart.”
“With
the
European
economy
teetering
on
recession,
we
believe
the
ECB
must
now
balance
the
(outside)
risk
of
resurgent
inflation,
with
the
potentially
more
pressing
need
to
ensure
the
economy
doesn’t
enter
a
prolonged
recession.
June
seems
like
a
reasonable
compromise
in
this
regard.”
‘No
Reason
to
Rush’
on
Interest
Rate
Cut
Decision
Key
ECB
members
have
suggested
that
any
decision
to
lower
interest
rates
is
months
away.
ECB
council
member
Peter
Kazimir
last
week
confirmed
that
expectation.
“There
is
no
reason
to
rush
a
rate
cut,”
Slovakia’s
central
bank
chief
told
Reuters.
“June
would
be
my
preferred
date,
April
would
surprise
me
and
March
is
a
no
go.”
ECB
board
member
Isabel
Schnabel
told
the
Financial
Times
in
early
February
that
inflation
“could
flare
up
again”.
The
“last
mile”
of
getting
inflation
down
will
be
the
hardest,
she
said.
“We
see
sticky
services
inflation.
We
see
a
resilient
labour
market.
At
the
same
time
we
see
a
notable
loosening
of
financial
conditions,”
she
said.
But
comments
by
Italy’s
central
bank
chief
Fabio
Panetta
show
some
division
on
the
council.
In
a
separate
interview,
he
told
the
newspaper
that
the
time
for
cutting
rates
is
“fast
approaching”.
Striking
more
doveish
tones
than
Schnabel,
he
dismissed
fears
of
a
fresh
inflation
spiral
and
said
inflation
in
the
euro
area
was
falling
faster
than
expected.
Watch
To
Watch
at
the
ECB
Meeting
With
the
ECB
expected
to
announce
rates
are
being
held
steady
when
it
unveils
its
decision
on
Thursday,
the
focus
for
investors
will
be
on
the
ECB’s
economic
outlook.
The
ECB
publishes
its
projections
on
economic
growth,
inflation,
wages,
unemployment
and
trade
Thursday
for
the
first
time
this
year,
with
three
more
updates
to
follow
on
a
quarterly
basis
throughout
2024.
Economists
at
Deka
Bank
expect
that
the
ECB’s
projections
will
show
slightly
lower
inflation
this
year
and
continued
convergence
towards
the
2%
target
towards
the
middle
of
next
year.
The
press
conference
is
also
likely
to
address
the
extent
to
which
the
slightly
lower
rise
in
wages
mitigates
upside
risks
to
the
inflation
outlook.
ECB
president
Christine
Lagarde
has
repeatedly
stressed
that
the
disinflation
process
would
have
to
advance
further
for
the
central
bank
to
be
sure
that
it
is
sustainable.
Inflation
Falling
Toward
ECB
Target
Inflation
in
the
eurozone
is
clearly
falling
quicker
than
the
ECB
had
projected,
Kazimir
added.
The
consumer
price
index
was
down
by
2.6%
in
February,
from
2.8%
in
January.
But
core
inflation
remained
at
3.1%
(January:
3.3%)
and
service
inflation
hovered
around
4%.
“Disinflation
is
going
much
quicker
than
we
expected
on
the
headline
level
but
we
can’t
be
certain
yet
about
core
inflation
because
wage
developments
remain
unclear,”
Kazimir
told
Reuters.
“For
that,
the
outcome
of
collective
bargaining
deals
will
be
crucial.
All
in
all,
we
are
on
the
right
track
but
we’re
not
yet
there.”
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