President Christine Lagarde reiterated that the European Central Bank is not going to discuss cutting interest rates, raising them this week to levels that investors and economists consider the maximum, Bloomberg reported.
Lagarde told reporters Friday after a meeting of the Eurogroup that the level of borrowing costs and the length of time they stay elevated “will matter significantly,” without elaborating. She said in Santiago de Compostela, Spain:
“I repeat, we have not decided, discussed or even pronounced cuts.”
These comments came less than a day after the rate was raised to 4%. Vice President Luis de Guindos and Estonian central bank governor Madis Muller said that current levels might be enough to bring inflation back to 2%. In doing so, they reinforced the idea that the move marks the end of the ECB’s unprecedented monetary tightening campaign. On Friday, Mueller wrote on his blog:
“Policymakers made it clear that, to the best of our knowledge, no further interest-rate hikes are expected in the coming months.”
With the euro-zone economy weakening, some had sought a pause. In a sign of how contentious Thursday’s decision was, Bank of France Governor Francois Villeroy de Galhau took the unusual step of refraining from commenting on it in a speech on Friday.
Even as traders placed bets on rate cuts, Latvian central bank Governor Martins Kazaks warned that another increase might yet be needed. He told Reuters:
“I’m comfortable with the current level of rates and I think we’re on track to reach 2% in the second half of 2025. But if the data tells us that we need another hike, we’ll do it.”
Lagarde also underlined that data would determine the path for borrowing costs. She claimed:
“We will set interest rates at sufficiently restrictive levels as long as it is needed to reach that 2% target.”
