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FRANKFURT – Christine Lagarde, President of the European Central Bank (ECB), suggested today that interest rate cuts could be on the horizon by summer, but she also underscored the importance of moving cautiously due to persistent inflation risks. In an interview with Bloomberg TV, Lagarde addressed the current market expectations, which have shown a more measured outlook on rate cuts, with Euribor futures indicating a less aggressive stance than previously anticipated.
Lagarde cautioned against hasty monetary policy decisions that might lead to the necessity of reversing course with rate increases later on. She stressed the importance of the ECB’s policy planning not being swayed by market speculation and the challenges of forecasting market sentiments.
The markets have adjusted their expectations accordingly, with Euribor futures dropped by up to 6.5 ticks with around 139bps of reductions priced in for 2024, signaling a tempered forecast for rate cuts. As of today, traders are pricing in less than a full 25 basis points reduction by the ECB’s April meeting. This shift in market sentiment aligns with the cautious tone set by Lagarde, as the ECB evaluates the economic landscape and prepares for its future policy moves.
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