ECB: Lagarde Explains Three Conditions for Further Rate Cuts

At the June 6 meeting, the European Central Bank cut interest rates by 25 basis points, which had been unchanged for nine months after rising continuously since the summer of 2022. President Christine Lagarde, in an article on the ECB’s blog, explained the reasons for the decision and also outlined what would be the three main conditions for further cuts in the future.

“Today we see progress on many fronts,” Lagarde explains. “Inflation has halved again, hitting 2.6%, and is now on track to reach 2% in the second half of next year. And our monetary policy is contributing significantly to bringing inflation back to target. So, by cutting rates, we have decided to ease the degree of monetary policy constraint.”

But there is still a long way to go to finally secure inflation dynamic, and “we will still have to keep our foot on the brake pedal for some time.”

Future ECB decisions will depend on three factors: “whether we continue to see a timely return of inflation to target, whether we see an easing of overall price pressures in the economy, and whether we continue to find our monetary policy as effective in containing inflation.”