ECB Considers Rate Cut Amid Inflation
ECB inches closer to a rate cut as inflation experiences a decline.
The European Central Bank maintained record-high borrowing costs on Thursday but initiated a modest move towards their reduction, citing a quicker-than-expected easing of inflation compared to projections from a few months ago.
After miscalculating a sudden inflation surge two years ago, the central bank overseeing the 20 eurozone countries has been hesitant to claim success over what eventually unfolded as one of the most severe episodes of inflation in decades.
Maintaining its anticipated stance by keeping the main interest rate at 4.0%, the ECB slightly adjusted its communication to acknowledge a sustained decline in inflation over the past 1-1/2 years and revised downward economic forecasts.
“Inflation has continued to decrease since the previous Governing Council meeting in January,” noted the ECB in a statement. “While various indicators of underlying inflation have further softened, elevated domestic price pressures persist, partly driven by robust wage growth.”
The central bank, having successfully dissuaded traders from anticipating a rate cut in early spring, carefully refrained from making any commitments on Thursday.
It reiterated instead that forthcoming decisions would, in part, hinge on the trajectory of underlying inflation, excluding more volatile prices that have displayed persistent resistance.
During a 1345 GMT press conference, ECB President Christine Lagarde is expected to reiterate the need for more evidence that wage increases will not contribute to a renewed inflationary surge.
Insiders have been indicating to Reuters for several months that the ECB is unlikely to decrease borrowing costs before its June 6 meeting, as critical wage data is anticipated to be available only in May.
