ECB Rate Decision Preview: Will ECB resist rate cut for longer?

It is broadly expected that the European Central Bank will keep the interest rate unchanged this January at 4.00%, amid statements made by policymakers suggesting that it is still too early to talk about reducing interest.

This scenario reinforces the European monetary authorities’ assertion that any future movement on the interest rate will depend on fresh data in the next stage, which brings into focus the Christine Lagarde’s remarks during the looming press conference after the interest rate decision.

The markets appreciate keeping the interest rate unchanged, in addition to the possibility of Lagarde stressing that the decision on interest will “depend on new data,” which makes it likely that the monetary authorities’ meeting this month will not be a turning point in the path of the price movement of the Euro.

The results of a survey, by Reuters, indicated that 45% of participants believe that the ECB may begin reducing interest rates next June, that is, in the second half of 2024.

But some survey participants believe that the first rate cut may come before next June, at a time when inflation is approaching the 2.00% target.

The current level of prices within the Eurozone suggest that the next move by the central bank may be to cut interest rates, but the timing in which this begins is still uncertain.


The Euro has recently suffered from sharp fluctuations due to changes in interest expectations. The basic scenario indicates keeping interest rates unchanged and that the focus will be on Lagarde’s statements. However, rate cut is unlikely to be the main concern of the ECB Council and European monetary policymakers, as it is the case with investors who make the prospects of a rate cut in Europe their primary issue.

Therefore, a gap between the authorities’ monetary interests and what investors focus on in the markets is getting more and more obvious, which is likely to show significant price movement in the Euro.

However, Lagarde and Co. will have the final say on the factors expected to influence Euro price movements. If the ECB relies on the latest economic data, the markets will also rely on the data in their estimates of the potential path of the currency as well.

Therefore, it is expected that the upcoming batches of inflation and employment data and other indicators that influence inflation will have great importance and a strong impact on the markets, an effect that may exceed in importance the upcoming remarks of monetary policymakers.

The ECB faces a situation in which expectations are rising that it may cut interest rates by at least 150 points this year, not very different from what the central bank was in last December.

These expectations were a source of strong pressure on the European monetary authorities, which forced ECB to downplay those expectations and assure investors that it was still too early to think about reducing interest rates.

No major change is expected about Lagarde’s thinking in the recent period, which is what is confirmed by the results of the last meeting of the European Central Bank and what was reiterated by the Monetary Policy Committee members recently.