Views and Ideas

No action in April but the first rate cut is coming.

12 April 2024

The Governing Council (GC) should leave its interest rates unchanged at the April meeting, but ECB President Christine Lagarde will probably pre-announce that the GC will lower its interest rates in June while proceeding carefully with easing, especially given the better macroeconomic outlook.

Please find below what we expect:

  • The European Central Bank (ECB) to again maintain its key interest rates at 4.0% for the deposit rate, 4.5% for the Refi rate and 4.75% for the marginal lending facility.
  • President Christine Lagarde to pre-announce that the ECB will cut interest rates in June, probably by 25 basis points, given its greater confidence in reaching the 2% inflation target.
  • Mrs. Lagarde to repeat that monetary decisions will remain data-dependent and meeting-by-meeting. Consequently, we do not believe she will provide any guidance on how the ECB will cut interest rates after the first move.

In summary, we do not expect any surprises. Indeed, there is a large consensus among ECB members that June is a key date for the first rate cut. We believe the GC will likely proceed cautiously with easing, and the pace of easing will be entirely data dependent. Consequently, this meeting should have a limited impact on financial markets, but it will probably push European interest rates and the euro currency lower as the first cut is finally coming after the unprecedented scale of interest rate hikes by 450 basis points in total.

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