Legal Economist's View Attention! When Will the ECB Start Cutting Rates?


The European Central Bank will cut interest rates for the first time in June, according to a nearly two-thirds majority of economists in a Reuters poll, although they differed on the likelihood of when the reduction would take place.

Inflation, the ECB's target is at 2.0%, slowing to 2.8% in January from a peak of 10.6% in October 2022 and expected to decline further. Yet policymakers have made it clear that they are not yet ready to consider rate cuts, even as growth slows.

Most members of the Governing Council, including President Christine Lagarde, are in line with the view that more data is needed, especially labor market data, will be needed before reducing the deposit rate from a record high of 4.00%.

Last week, Lagarde said wages data from Q1, due in May, would be important for the ECB. The data would make June the most likely month to consider the first rate cut, an expectation shared by markets and economists.

A nearly two-thirds majority of forecasters, 46 out of 73, said the central bank would first cut the deposit rate by 25 basis points to 3.75% in June. That consensus view has strengthened from around 45% in the January survey.