ECB’s Lagarde suggests potential summer rate cut, but maintains reserved stance

In an interview at Bloomberg House in Davos, ECB President Christine Lagarde said “it’s likely” for a rate cut in the summer, but added that she has to be “reserved”. She emphasized ECB’s data-dependent approach and acknowledged the prevailing uncertainty and certain indicators that are yet to reach desired levels.

Lagarde expressed concern regarding market expectations for aggressive rate cuts, labeling them as a “distraction” from the ECB’s primary goal of combating inflation. She expressed concern that if market anticipations are misaligned with reality, they could hinder ECB’s inflation control efforts.

Reiterating the ECB’s commitment to achieving sustainable inflation of 2% over the medium term, Lagarde asserted, “We are on the right path, we are directionally towards the 2%, but unless and until we are confident that it is sustainably at 2% — medium term — and we have the data to support it, I’m not going to shout victory.”