ECB Press Conference: Lagarde Comments On Policy Outlook After Leaving Key Rates Unchanged

ECB Press Conference Highlights

The European Central Bank (ECB) held a policy meeting on March 7, 2024, to discuss interest rates and economic outlook. This update provides a comprehensive summary of the key takeaways from the meeting.

Interest Rate Decision:

• Interest rates were left unchanged as widely expected.
• Main refinancing operations, marginal lending facility, and deposit facility rates remain at 4.50%, 4.75%, and 4.00%, respectively.

Economic Projections:

• Inflation: 2.3% in 2024, 2.0% in 2025, and 1.9% in 2026.
• Inflation excluding energy and food: 2.6% in 2024, 2.1% in 2025, and 2.0% in 2026.
• Growth: 0.6% in 2024, 1.5% in 2025, and 1.6% in 2026.

Key Takeaways from Lagarde ECB Policy Statement:

• Restrictive financing conditions and past interest rate increases are weighing on demand and pushing down inflation.
• Interest rates are expected to remain sufficiently high for a prolonged period to achieve the inflation target.
• Interest rate decisions will be data-dependent and based on the assessment of the inflation outlook, underlying inflation dynamics, and strength of monetary policy transmission.
• The APP and PEPP portfolios are declining as planned, and the ECB intends to continue reinvestments and gradually reduce the PEPP portfolio over the second half of 2024.

Market Reaction:

• EUR/USD initially declined slightly but recovered shortly after.

ECB President Christine Lagarde's Comments:

• "Surveys point to a gradual recovery over the course of this year."
• "Impact of past rate increases will gradually fade."
• "Demand for labor is slowing."
• "Domestic price pressures are elevated."
• "There are signs that growth in wages is starting to moderate."
• "Longer-term inflation expectations remain broadly stable around 2%."
• "Risks to economic growth remain tilted to the downside."

Table of Percentage Change of Euro (EUR) Against Major Currencies

The ECB's decision to hold interest rates unchanged reflects its commitment to bringing inflation back to the target of 2% while supporting economic growth. The updated economic projections and Lagarde's comments provide further insight into the ECB's policy direction, which will continue to be data-dependent and focused on achieving its inflation target.