Today, meeting in Frankfurt, Germany, the ECB Council reduced the interest rate applicable to the deposit facility to 2.00%, the lowest since the end of 2022, while the interest rates on main refinancing operations and the marginal lending facility decreased to 2.15% and 2.40%, respectively.
This rate cut — the eighth in the current cycle of monetary easing — will take effect from June 11.
In a press conference following the announcement, Lagarde did not explicitly state that the ECB might pause rate cuts, but indicated the end of a monetary policy cycle is approaching.
“At the current interest rate level, we are nearing the end of a monetary policy cycle responding to accumulated shocks, including COVID-19, the war in Ukraine, and the energy crisis,” which drove prices up, she stated.
The central bank’s president further noted that the ECB is well-placed to address economic uncertainties related to customs tariffs.
This is despite the unknown “outcome of negotiations” between the European Union (EU) and the United States on customs tariffs and the “level of retaliations” that might be decided, potentially impacting the economy.
According to the ECB president, the central bank is currently confident in achieving its 2% medium-term inflation target: “We are well-positioned. We are in a good position” to reach that inflation target, she considered.
The ECB forecasts that overall inflation will decrease due to the falling energy prices and the strength of the euro, reaching 2% in 2025, 1.6% in 2026, and 2.0% in 2027.
In the press conference after the Governing Council’s meeting, Christine Lagarde also expressed her determination to complete her mandate at the ECB, which ends in October 2027, refuting rumors that she might leave early to lead the World Economic Forum in Davos, Switzerland.
“I can state with full conviction that I have always been and remain fully committed to fulfilling my mission and completing my mandate,” she declared.
Christine Lagarde’s term began in 2019 and is expected to end in 2027.
A week ago, the Financial Times reported exclusively that Lagarde had proposed shortening her term at the monetary institution by about 10 months to assume the presidency of the World Economic Forum, which a bank spokesperson denied.
In the report, the Financial Times cited Klaus Schwab, founder and former president of the World Economic Forum (Davos Forum), stating that Lagarde and he had discussed this possibility years ago, even considering providing an apartment in Switzerland for her to lead the organization.
[Updated at 15:15]
