ECB Could Wait Several Meetings Between Rate Cuts, Lagarde Says

• European Central Bank interest rates are not on a linear downward path and policymakers could at times wait more than one meeting before cutting them again, ECB President Christine Lagarde said in a newspaper interview. The ECB cut rates from a record high last week but held off committing to more policy easing given stubbornly high wage growth and yet another increase in inflation projections.
• "We’ve made the appropriate decision, but it doesn’t mean interest rates are on a linear declining path," Lagarde told several major European newspapers in a joint interview. "There might be periods where we hold rates again."
• When asked if this meant the ECB could hold rates for longer than a single meeting, she said "it's a possibility". Markets now expect little more than one rate cut over the four meetings left this year and see between 3 and 4 reductions through the end of 2025, so in the next 12 policy meetings.
• While Lagarde did not explicitly say the ECB would hold interest rates at their current level in July, she argued that further cuts depended on a slew of wage and corporate profit indicators, which only become available closer to the bank's September meeting. "We will need more data, including on wages, on how unit profits are growing and absorbing part of the labour costs, and on productivity," she said.
• Still, Lagarde argued against explicit commentary given the uncertainty and likely bumps in the path of inflation. "Forward guidance has not been helpful," Lagarde said. "Time-dependent guidance is currently not helpful."

(Source: Reuters)