The authorities of the European Central Bank (ECB) see a growing possibility of a break in their cycle of monetary flexibility on their next April meeting, before interest rates decrease again once there is greater clarity on commercial and tax policies, four sources told Reuters.
The ECB reduced interest rates on Thursday, as expected, but President Christine Lagarde refused to repeat his previous message that the trajectory towards lower interest rates is clear, causing some confusion among investors.
The sources that spoke with Reuters after the meeting said they had a break in April as a clear possibility, of which some of them discussed informally during the pauses of the two -day meeting.
However, the sources, which represent both the milder and most aggressive field in the policy of interest of the ECB council, have agreed to be unlikely that the central bank maintains its 2.5% deposit rate and more cuts are needed, at least based on the information available today.
A pcs spokesman didn’t want to comment.
The main variables include commercial policy. If the United States require rates to the European Union, this will increase the possibilities of further cuts, perhaps even since April, some sources have said.
On the other hand, a retaliation from the European Union makes the scenario more uncertain, increasing the risk of stagflation.
On the other hand, if Germany advances with its military and infrastructural expenditure plans proposed, this should increase growth and inflation and make a cut in April less likely.
The sources added that the final writing of the new ECB guide, that the interest would be “significantly less restrictive”, was the result of a middle ground achieved before the meeting.
Some wanted to maintain a reference before “restrictive” monetary policy, which means that the interest was high enough to limit economic growth. Others defended the removal of this word.
Source: Terra
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