As was widely anticipated, the European Central Bank did not touch the level of its key rates, those which influence the interest rates offered by commercial banks to individuals and businesses. The refinancing rate, that of the marginal loan facility and that of the deposit facility remain at 4.5%, 4.75% and 4% respectively.
In its monetary policy statement, the Governing Council indicates that “most measures of underlying inflation are falling, wage growth is gradually flattening “. Its future decisions will ensure that rates remain at sufficiently restrictive levels, “ as long as necessary ” but ” whether the Governing Council’s updated assessment of the inflation outlook, underlying inflation dynamics and the strength of monetary policy transmission would further strengthen its confidence in the sustainable convergence of inflation inflation towards the target, it would be appropriate to reduce the current restrictive nature of monetary policy “.
This is the first time that the ECB has mentioned, in this cycle, that it could let go, even if this is conditional on further macroeconomic progress. Investors’ attention is now focused on the press conference of Christine Lagarde, the president of the ECB, to see if her speech corroborates the market’s expectations concerning a possible easing of rates in June. “ Christine Lagarde will not give a clear signal on the trajectory of rates in the future, but we expect cuts of 100 basis points this year, which is more than what is expected in the market, Capital Economics said in a note. The central bank is not explicitly saying when it will cut rates, but it will update its inflation forecast in June. So this is the most obvious moment “.
Around 2:45 p.m., the Cac 40 erased its decline and stabilized at 8,049.8 points in a business volume of 1 billion euros.
No new lessons to be learned from producer prices
According to futures contracts, the main Wall Street indices should slightly widen their losses from the day before when they lost more than 1%. The scenario of monetary easing by the Fed in June fell through after the better-than-expected US consumer price data for March, which only confirmed that the surge in inflation perceived at the start of he year was not just an accident.
The producer price index for the month of March, the calculation of which is closer to that of the PCE index, the Fed’s preferred measure of inflation, stood at 2.1% over one year, a slightly less significant acceleration than expected (+2.2% for the consensus after 1.6% in February). But, once the food and energy categories are excluded, the increase is a tenth above expectations, at 2.4% from 2%.
Investors believe that the Fed will only cut rates twice this year, starting in September, which is lower than the Fed’s latest dot plot projections, which suggested three reductions in 2024. The CPI report, which is added to the employment report published last week, complicates the Fed’s timetable. These latest data argue in favor of postponing the date of the first reduction beyond the middle of the year and reinforce our economic outlook, according to which the American central bank should ease its monetary policy at a more gradual pace than its counterparts from developed economies “, commented Tiffany Wilding, economist at Pimco.
SocGen, TotalEnergies and Publicis stand out within the Cac 40
Société Générale takes 1.8%, leading the Cac 40, after signing a memorandum of understanding with Groupe BPCE concerning the sale of its professional equipment financing activities, for an amount of 1.1 billion euros.
The bank is followed in the ranking by Publicis, up 1.3%. The first company in the Cac 40 to have presented its first quarter accounts, the advertising group reached a historic peak after reporting an organic increase in its net income of 5.3%, beyond the expectations of its managers and analysts.
TotalEnergies also set a new record while oil prices, stable, rose more than 1% the day before due to tensions in the Middle East. An escalation is feared after the announcement by the leader of Palestinian Hamas of the death of several of his sons in an Israeli strike in Gaza. Furthermore, according to several media, including Bloomberg, Washington and its allies believe that an Iranian strike is imminent on the Jewish state.
Technip Energies, downgraded by JPMorgan from “outperformance” to “neutral”, fell 3.2%.
