President Christine Lagarde reiterated that the European Central Bank isn’t discussing cuts in interest rates — having raised them this week to what investors and economists believe is the peak.
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.
“I repeat, we have not decided, discussed or even pronounced cuts,” she said in Santiago de Compostela, Spain.
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The comments come less than a day after policymakers raised rates for a 10th straight time, to 4%. Reinforcing the idea that the move marked the end of the ECB’s unprecedented campaign of monetary tightening, Vice President Luis de Guindos and Estonian central bank head Madis Muller said current levels may be sufficient to return inflation to 2%.
Policymakers “made it clear that, to the best of our knowledge, no further interest-rate hikes are expected in the coming months,” Muller said Friday in a blog post.
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 may yet be needed.
“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,” he told Reuters. “But if the data tells us that we need another hike, we’ll do it.”
Lagarde also highlighted that data will determine the path for borrowing costs.
“We will set interest rates at sufficiently restrictive levels as long as it is needed to reach that 2% target,” she said.
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