ECB set to cut rates, maintain restrictive policy for ’24 – ECB’s Lane

The European Central Bank (ECB) is set to start cutting interest rates next month but plans to maintain a restrictive policy throughout 2024, according to Chief Economist Philip Lane, cited by Bloomberg on Monday.

Lane indicated that while the ECB will begin easing at the June 6 meeting, the policy will remain restrictive, albeit slightly less so. He noted that “barring major surprises,” there is sufficient evidence to “remove the top level of restriction.”

Future rate cuts are expected to pause in July and potentially resume in September. This aligns with statements from officials like Joachim Nagel and Isabel Schnabel. Lane highlighted that as inflation nears the target next year, the focus will shift to aligning interest rates with that target.

Recent data suggests a possible inflation uptick in May, and the core measure, which excludes volatile items like energy, may have stabilised.

A key wage indicator also accelerated in the first quarter, but Lane emphasised that the overall trend still points to wage deceleration, which is crucial. He concluded, “Things will be bumpy, and things will be gradual.”