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The ECB expressed doubts about the interest rate cut


July, 05 2024
watermark Economic news

The minutes of the ECB's June meeting revealed differences in views on rate cuts. Earlier, the head of the regulator, Christine Lagarde, said that only one member of the council opposed the reduction of interest rates last week – the governor of the Central Bank of Austria, Robert Holzman. However, the published document showed that not all council members agreed with the ECB's recent decision to cut the rate.


They believed that wage growth and steady inflation did not require a change in rates. Nevertheless, the ECB stressed that the council members are ready to support the proposal to reduce rates, despite the concerns expressed. This statement is likely to strengthen investors' expectations that the ECB will leave rates unchanged at its next meeting in two weeks. 


The market estimates the likelihood of two additional 0.25 percentage point rate cuts this year. Recall that on June 6, the base deposit rate was lowered from a historic high of 4% to 3.75%. The ECB justified this decision by its confidence in the forecast that inflation would return to the target level of 2% in due course. 


The decision to cut rates was carefully announced by politicians several months before its adoption, which made it difficult to cancel it, even though the data published before the meeting caused concern among several council members. An additional factor of concern was the monetary policy of the United States – the Federal Reserve has not yet started to cut rates and does not plan to do so until September.


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Foreign exchange trading carries a high risk of losing money due to leverage and may not be suitable for all investors. Before deciding to invest your money, you should carefully consider all the features associated with Forex, as well as your investment objectives, level of experience, and risk tolerance.