News Digest:

The European Central Bank cut its main lending rates by 25 basis points to 3.75%, the first time it has brought down interest rates since 2019. However, chairperson Christine Lagarde warned that more cuts would be concomitant on the inflation going below the 2% mark.

In a note, Lagarde explained that though the inflation rates hadn’t dropped to the targeted levels, the ECB had initiated the rate cuts to stamp out fears of high inflation becoming a permanent feature in the region’s economy. “It is our duty to Europeans to keep inflation low and stable,” she said.

Takeaway:

Analysts expected the ECB move as the start of an easing cycle, but Lagarde said since inflation is yet to be squeezed out, “rates will remain restrictive for as long as necessary to ensure price stability on a lasting basis.” The official said future decisions will hinge on inflation being curtailed to ECB targets, an overall easing of price pressure, and how future monetary policies impact taming inflation.

End Notes

Source: https://en.mercopress.com/2024/06/10/christine-lagarde-why-we-adjusted-interest-rates