MADRID (Reuters) – ECB Deputy President Luis Deguindos said on Wednesday that inflation in the euro zone is expected to fall further, but the European Central Bank needs more data before starting to cut interest rates.
The ECB has kept interest rates at record highs since September, consistently pushed back on rate cut negotiations, and is still too early to declare wage growth all clear and start easing restrictive policies. claims.
“The process of disinflation will continue (…) The direction of monetary policy will change as the data we receive shows that our forecasts indicate that both headline and core inflation are approaching 2%,” De Guindos said. will change,” he said. he told Spanish television station Antenna 3.
The ECB will next meet on March 7, when new economic forecasts will be presented, which are likely to trigger at least a discussion on interest rate cuts in the coming months.
“If the data confirms what I have said before, the European Central Bank will change the level of interest rates,” De Guindos said.
Deguindos warned that although productivity evolution remains subdued in Europe, pressure from rising wages is causing costs to rise for companies. But some of those costs are being absorbed by profits, he said.
The ECB has long maintained that key figures on the 2024 wage settlement will only be published in May, so the June meeting will be the first time policymakers will get evidence of whether rapid wage growth is slowing. It will be an opportunity for
Investors are also paying attention to this message. Just a few weeks ago, we were betting on a 150 basis point rate cut in 2024, but expectations have faded and the initial move seen in June is now only 88 basis points, an anomaly in market expectations. There has been a big change.
(Reporting by Jesús Aguado; Additional reporting by Emma Pinedo; Editing by Andrei Calip and David Evans)
