ECB: Rates to Stay Steady, First Cut “on the Horizon”

Members of the European Central Bank (ECB) Governing Council reportedly agreed to keep all three benchmark rates unchanged at the next meeting. A rate cut now would be “premature,” according to what follows from the minutes of the March 6-7 meeting, which agreed to leave eurozone rates unchanged for core refinancing operations, marginal refinancing operations, and central bank deposits at 4.50%, 4.75%, and 4.00%, respectively.

Nevertheless, there is a clear possibility of monetary policy easing in the coming months: “The date for the first rate cut is starting to become clearer; (…) arguments supporting a cut are strengthening.”

In the near term, however, “patience and caution” prevail with regard to reducing inflation, which is approaching 2% faster than expected in the eurozone.

The European Central Bank’s next meeting is scheduled for April 11, on which day it is likely to decide on the first rate cut in June. By early summer, more data will become available, the data that the ECB continues to set as a benchmark for all its actions, in particular the evolution of wages will become better known. European central bank governors still have doubts about the sustainability of the deflationary process, especially in services and domestic inflation and particularly about the trend in wages, productivity, and profits.