ECB lays ground for June rate cut as inflation falls
By Francesco Canepa and Balazs Koranyi
FRANKFURT (Reuters) -The European Central Bank kept borrowing costs at record highs on Thursday while cautiously laying the ground to lower them later this year, saying it had made good progress in bringing down inflation.
Having underestimated a sudden surge in prices two years ago, the central bank for the 20 countries sharing the euro has been reluctant to declare victory over what turned out to be the most brutal bout of inflation in decades.
But with new forecasts pointing to lower inflation and growth, ECB policymakers on Thursday indicated they were preparing for a first cut in interest rates, probably in June, provided incoming data, especially on wages, confirms the trend.
«We did not discuss cuts for this meeting, but we are just beginning to discuss the dialling back of our restrictive stance,» ECB President Christine Lagarde told a press conference.
Lagarde hinted strongly that was more likely to happen at the ECB's June 6 meeting, as wage data for the first quarter will then have been published. Sources have been telling Reuters similar for months. The ECB has another policy meeting before then, on April 11.
«We will know a little more in April, but we will know a lot more in June,» Lagarde said.
She noted that inflation, including nearly all underlying measures, has been falling towards the ECB's 2% target and is now expected to come in lower over the next two years than the central bank had anticipated only a few months ago.
In new quarterly economic projections released on Thursday, the ECB cut its forecast for price growth this year from 2.7% to 2.3% and said it now expects inflation to fall to 1.9% in summer 2025 and stay there until the end of 2026.
Lagarde
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