EURO: Lane from ECB: Wage Pressures Moderated Since 2023
The ECB Chief Economist Philip Lane said rates are too late to cut will bring inflation down below the neutral level, So rate cuts do in the near term and then data dependent rate cut followed this year. Inflation is decelerated in the Euro zone as we expected, we expected persistent inflation growth in end of 2024 or End of 2025. ECB has already agreed with June month rate cut deal due to wage pressures are narrowing in the Euro zone.
EURGBP is moving in box pattern and market has reached support area of the pattern
Phillip Lane, Chief Economist of the European Central Bank (ECB), emphasized on Monday the potential consequences of maintaining overly restrictive interest rates, warning that such a stance could lead to inflation falling below target over the medium term. He suggested that corrective measures might be necessary, possibly involving interest rates dipping below the neutral level.
Lane provided several key insights:
- The scope of domestic inflation dynamics is becoming narrower.
- The majority of the tightening effect on inflation is anticipated to occur later, with significant pass-through effects expected in the coming period.
- The ECB’s wage tracker indicates that overall wage pressures have moderated since 2023.
- It is essential to adjust the calibration of the appropriate level of restrictiveness considering the impact of lower expected inflation.
- Even if inflation does not decline smoothly throughout 2024, further disinflation is likely in 2025.
- Swiftly easing the policy stance would contradict the goal of achieving sustainable inflation return to the target, particularly if inflation proves to be more persistent than initially anticipated.
EURO: ECB Policymakers: Rate Cut Possible, Requires Caution
Philip Lane, the Chief Economist of the European Central Bank (ECB), expressed concern that delaying interest rate cuts could result in inflation falling below the neutral level. He advocated for timely rate cuts in the near term, followed by subsequent adjustments based on economic data throughout the year. Lane noted a deceleration in inflation within the Eurozone, consistent with earlier projections. He anticipated sustained inflation growth by the end of 2024 or possibly extending into 2025.
EURAUD is moving in Ascending channel and market has reached higher low area of the channel
The ECB has already reached consensus on implementing a rate cut in June, primarily driven by the narrowing of wage pressures across the Eurozone. This decision underscores the ECB’s proactive stance in addressing economic trends and maintaining price stability within the region.
Key policymakers within the European Central Bank (ECB) emphasized the potential for interest rate cuts amidst slowing inflation but cautioned against hasty policy adjustments, stressing the importance of deliberate decision-making despite the evident trajectory. With an impending rate cut expected on June 6, discussions have shifted towards subsequent moves and their timing, with market expectations now aligning with just one additional cut projected for the remainder of the year.
French central bank chief Francois Villeroy de Galhau acknowledged the likelihood of the June rate cut but urged a measured approach for future decisions. While not advocating for immediate follow-up actions, he encouraged maintaining flexibility and refraining from premature commitments, highlighting the importance of data-driven assessments in determining the timing and pace of policy adjustments.
ECB Chief Economist Philip Lane echoed similar sentiments, warning against delaying easing measures excessively, which could result in inflation falling below the target level. Lane emphasized the need for corrective action to address such a scenario, even if it entails reducing interest rates to below-neutral levels.
Additionally, uncertainties surrounding the Federal Reserve’s interest rate decisions add complexity to the ECB’s policy outlook. Market expectations have shifted significantly from earlier in the year, with current projections anticipating only one more rate cut after June.
Lane remained optimistic about the trajectory of disinflation, projecting a gradual return to the ECB’s 2 percent inflation target by 2025 despite potential volatility in price growth indicators in the near term.
Villeroy suggested that achieving this inflation target could pave the way for further policy easing, indicating room for additional rate cuts. He deemed present market expectations regarding the terminal rate reasonable, suggesting that the deposit rate, currently at 4 percent, could eventually settle at 2 percent.
Both policymakers downplayed concerns about recent increases in negotiated wage growth, anticipating a gradual deceleration in earnings. Lane emphasized that such deceleration does not necessarily indicate an immediate return to a steady state, suggesting a gradual adjustment process throughout the year.
EURO: Lane: ECB to Maintain Restrictive Policy All Year
Philip Lane, Chief Economist of the European Central Bank (ECB), emphasized the importance of timely interest rate cuts to prevent inflation from falling below the neutral level. He advocated for initial rate cuts in the near term, followed by adjustments based on economic data throughout the year. Lane noted a deceleration in inflation within the Eurozone, aligning with previous expectations. Projections anticipate sustained inflation growth by the end of 2024 or possibly extending into 2025. The ECB has already confirmed a rate cut deal for June, driven by narrowing wage pressures across the Eurozone.
EURNZD is moving in Descending Triangle and market has fallen from the lower high area of the pattern
According to Chief Economist Philip Lane, the European Central Bank (ECB) is poised to initiate interest rate cuts next month while maintaining a restrictive policy stance throughout 2024. Lane emphasized the need for continued restraint in monetary policy, stating that while remaining within this restrictive zone, there is room for some downward adjustment.
In an interview with the Financial Times published on Monday, Lane indicated that, barring significant surprises, current economic conditions warrant a reduction in the top level of restriction at the upcoming June 6 meeting. The initiation of monetary easing at this meeting has been widely anticipated, with subsequent steps expected to be clearer. Market expectations suggest policymakers may pause in July before resuming reductions in September.
Lane also highlighted the evolving debate around interest rates, suggesting that as inflation approaches the target level next year, discussions regarding the appropriate interest rate level will shift.
The impending rate cut comes amidst a backdrop of potentially rising inflation in May. Additionally, the core inflation measure, which excludes volatile components such as energy, is expected to stabilize for the first time since July.
Speaking at a conference, Finland’s Olli Rehn echoed Lane’s sentiments, noting that inflation is gradually converging towards the ECB’s 2 percent target, providing justification for easing monetary policy in June. Rehn highlighted a gradual moderation in workers’ pay gains, a trend also observed by Lane, who emphasized the ongoing deceleration in overall wage growth.
Despite recent indications of accelerated wage growth in the first quarter, Lane cautioned that the path ahead may be characterized by both bumps and gradual adjustments.
Don’t trade all the time, trade forex only at the confirmed trade setups
Get more confirmed trade signals at premium or supreme – Click here to get more signals , 2200%, 800% growth in Real Live USD trading account of our users – click here to see , or If you want to get FREE Trial signals, You can Join FREE Signals Now!
