ECB, Christine Lagarde: “Rate Cut Possible in June”

European Central Bank (ECB) President Christine Lagarde called an interest rate cut in June “possible.” It's a measure the European economy has long been waiting for to try to reboot now that inflation is under control.

Christine Lagarde, speaking in Frankfurt, Germany, at the ECB and its Watchers Conference, made it clear that the first month of summer will be the moment of a possible monetary policy reversal. The next few weeks “will allow us to assess whether inflation will continue to fall substantially in line with our forecasts. If that happens, it will be an important validation of them,” and “we can move to revise our policies, making them less restrictive.” Either way, there will be no commotion. After such a move, “a new period will start when we will need to continually reaffirm that the indicators are in line with our inflation forecast.”

The ECB is setting new benchmarks while remaining cautious; there are concerns that the decline in inflation may be stalled. Therefore, key indicators such as wage growth, corporate profits, and labor productivity index will be monitored. “Our decisions must remain tied to performance,” she said. “This means that even after the first rate cut, we cannot commit in advance to a timetable for rate changes.”