FX.co ★ Lagarde Says ECB May Hold Rates Steady For More Than One Meeting

The European Central Bank (ECB) is projected to keep interest rates steady for the foreseeable future. ECB President Christine Lagarde emphasized that the current restrictive monetary policy has not concluded, indicating that the central bank may not move to reduce rates for several upcoming meetings.

During an interview in Paris with several European newspapers, including Les Echos, Expansion, Il Sole 24 Ore, and Handelsblatt, Lagarde noted that interest rates are not expected to follow a straightforward downward trajectory.

Last Thursday, the ECB reduced its interest rates by 25 basis points, bringing the refinancing rate to 4.25 percent. This marked the first rate cut since 2019 and an uncommon instance where the euro area central bank acted ahead of the US Federal Reserve.

Lagarde characterized the rate cut as an "appropriate" decision, pointing out that this was not the first instance where the ECB and the Federal Reserve diverged in their policy approaches.

Lagarde reiterated that the ECB’s future decisions would be data-dependent. She also clarified that the absence of forward guidance on interest rates does not signify a deep division within the Governing Council. Rather, it reflects the policymakers' belief that providing such guidance is not beneficial given the current high levels of uncertainty.

Lagarde further mentioned that, with the exception of one policymaker, the Governing Council was unanimous in the recent rate cut decision.

Economists predict that the ECB may implement one additional rate cut before the year ends.