The single currency rose slightly on Thursday against the dollar despite the ECB’s rate cut, its president suggesting that the institute should exercise caution in terms of monetary policy. Around 2:00 p.m. GMT (4:00 p.m. in Paris), the euro gained 0.17% against the greenback, to 1.0887 dollars per euro. After an unprecedented phase of monetary tightening, the European Central Bank (ECB) began to lower its key rates on Thursday. Serving as a reference, the rate on deposits increased from 4% to 3.75%. The last ECB rate cut was almost five years ago, in September 2019.
“The next few months will continue to be hectic”
The market particularly scrutinized the intervention of the President of the ECB, Christine Lagarde, who should set the tone for the institution’s next monetary policy meetings. Inflation is falling again in the euro zone, but “the next few months will continue to be hectic” , declared Ms. Lagarde on Thursday, thus suggesting that the institute should exercise caution in terms of rate policy. There is “obstacles on the road that can surprise you” And “which we are not entirely sure of [l’]magnitude »added the central banker.
“ECB policymakers should now press the pause button as sticky inflation has once again become a Source of concern”, notes Susannah Streeter, analyst at Hargreaves Lansdown. Disinflation is indeed continuing a bumpy path in the euro zone. From a peak of 10.6% over one year in October 2022, inflation fell to 2.4% in March and April, before rebounding slightly to 2.6% in May. “While rates have risen like a rocket, it is likely that they will come back down in a jigsaw fashion”says Ms. Streeter.
