ECB cannot commit to rate path even after first cut: Lagarde

ECB cannot commit to rate path even after first cut: Lagarde

Business

Many ECB policymakers have expressed support for a first reduction in borrowing costs

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FRANKFURT (Reuters) - The European Central Bank cannot commit to a pre-set number of interest rate cuts even after it starts reducing borrowing costs as that will depend on incoming data, ECB President Christine Lagarde said on Wednesday.

Many ECB policymakers have expressed support for a first reduction in borrowing costs from their current record highs, most likely in June, with the debate now focused on how many more cuts would follow.

But Lagarde appeared to try to dampen such speculation on Wednesday even as she acknowledged that incoming data about wages and inflation had been encouraging.

"Our decisions will have to remain data dependent and meeting-by-meeting, responding to new information as it comes in," Lagarde said. "This implies that, even after the first rate cut, we cannot pre-commit to a particular rate path," she told a conference in Frankfurt.

Inflation in the euro zone has fallen from a double-digit percentage increase in the autumn of 2022 to 2.6% last month.

Lagarde spelled out the conditions needed for the ECB to start cutting rates: slowing wage growth, a continued fall in inflation and new internal projections confirming that price growth is returning to its 2% target.

"If these data reveal a sufficient degree of alignment between the path of underlying inflation and our projections, and assuming transmission remains strong, we will be able to move into the dialling back phase of our policy cycle and make policy less restrictive," Lagarde said.