Lagarde: ECB could wait several meetings between rate cuts

ECB President Christine Lagarde stated that interest rates are not on a linear downwards path and that policymakers could wait more than one meeting before cutting them again. Markets now expect little more than one rate cut over the four remaining policy meetings this year and between 3 and 4 reductions through the end of 2025, in the next 12 policy meetings.

The European Central Bank has cut interest rates from a record high last week, but has not committed to any more policy easing due to high wage growth and inflation projections.

Lagarde argued that further cuts depended on a variety of wage and corporate profit indicators, which only become available in the run-up to the bank’s September meeting. She said that more data, including wages, unit profits, labour costs, and productivity, would be needed.

ECB board member Isabel Schnabel and Slovak policymaker Peter Kazimir have both said the ECB should not cut rates again next month, but Lagarde argued against explicit commentary due to uncertainty and likely inflation bumps.