Piero Cipollone, a member of the Executive Board of the European Central Bank, said that even after the interest rate cut, the ECB's monetary policy will remain "very restrictive." Now money markets priced in about 90% chance of an ECB rate cut by June from less than an 80% chance late on Wednesday. They discounted more than 90 basis points in 2024.
Cipollone also reported that the ECB is increasingly confident that inflation will return to the target level (2%) by mid-2025, as wage growth slows down, which strengthens the case for lowering interest rates.
According to final data from Eurostat, consumer price growth slowed in February, confirming experts' forecasts and preliminary estimates. Meanwhile, core inflation fell to its lowest level since March 2022. According to the report, the consumer price index rose by 2.6% per year after an increase by 2.8% per year in January. European Union annual inflation was 2.8% in February, down from 3.1% in January. Eurostat reported that the core consumer price index - excluding energy, food, alcohol and tobacco - rose by 3.1% per year, as expected, after an increase by 3.3% per year in January. Core inflation has been declining for the 7th month in a row.
"Wage growth is likely to slow gradually in the medium term to levels consistent with our inflation target and productivity growth, in line with forecasts," Cipollone added, but cautioned against focusing too much on short-term wage changes, arguing that even after a recovery, real wages will still be below the level justified by post-pandemic productivity growth.