ECB Sticks To Inflation Fighting Even As Rate Cuts Loom

The European Central Bank (ECB) held interest rates at a record-high 4% on Thursday and reaffirmed its commitment to fighting inflation, even as the time to start easing borrowing costs approaches.
The ECB ended its fastest-ever cycle of rate hikes in September and it has been adamant, including on Thursday, that it is too soon to discuss a reversal since price pressures have not been fully extinguished and many wage negotiations have yet to conclude.
"The consensus around the table was that it was premature to discuss rate cuts," ECB President Christine Lagarde told her regular news conference following the decision, insisting that future decisions would depend on incoming data. "We need to be further along the disinflation process to be confident that inflation will be at target - sustainably so."
Policymakers speaking on condition of anonymity after the meeting said they were open to a change in rhetoric at their next meeting, paving the way for an interest rate cut possibly in June, if upcoming data confirms inflation has been vanquished.
Notably, in a possible sign that the tone was starting to change, a reference in previous statements to elevated domestic price pressures and strong labour cost growth had been taken out on Thursday. Lagarde had, however, cautioned against over-interpreting such omissions and urged observers to focus more on what content was left in the statement.
Investors are betting that the ECB is getting it wrong on both growth and inflation and will be forced to U-turn and deliver five rate cuts in rapid succession from early spring, with bets on an April rate cut increasing after Lagarde's press conference.
However, the discrepancy in rate expectations stems from a different outlook on growth and how much past rate hikes are slowing economic activity across the 20 countries that use the euro currency - not least in Germany, where the closely watched Ifo survey pointed to worsening business sentiment.

(Source: CNBC)