DWS: Data dependency before date dependency for ECB

DWS: Data dependency before date dependency for ECB

January 25, 2024

Monetary policy
ECB.jpg

Inflation rates have fallen far enough that no further interest rate hikes are necessary before June.

‘As widely expected, the ECB has left key interest rates unchanged. Inflation rates have now fallen far enough that no further interest rate hikes are necessary,’ reacts DWS today. ‘However, the ECB does not yet need to lower interest rates as the economic outlook is not yet bad enough for this. Even if the current economic data suggests that the ECB's growth forecast for the current year is still too high, the ECB is not currently expecting a recession.

ECB President Christine Lagarde made it clear once again at the press conference that discussions about interest rate cuts would be premature at present and that data dependency takes precedence over date dependency. Nevertheless, June remains the ECB's preferred date for a first interest rate cut. In addition to inflation data, wage trends are at the heart of the ECB's deliberations. Relevant information for the majority of employees will not be available until the end of the first quarter. In addition, the ECB projections will present their new projections at the June meeting. We are therefore sticking to our assessment that there will be no interest rate cuts before June.’

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