Future evolution of interest rates

/ 9th November 2024 /

The media and analysts frequently make projections about the behaviour of the ECB and the Fed.

However, the most reliable approach is to listen to the latest statements from the central banks’ top officials.

Luis de Guindos, Vice President of the European Central Bank, commented on March 15 in an event in Barcelona, that the evolution of inflation in the eurozone is positive, going from being above 10% to now being below 3%.

He added that these “good news regarding the evolution of inflation would end up being reflected in monetary policy.”

“We want to gather information about the evolution of factors that influence inflation, and we are convinced that in June we will have a higher level of knowledge,” Guindos commented.
In these months, many collective agreements must be signed, in which possible wage increases will be determined, impacting decisions on the monetary policy of the organization.
In any case, he clarified, we should not expect a reduction in rates to levels of five or six years ago.
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Two other relevant statements are the ones from Yannis Stournaras, Governor of the Bank of Greece, and Klaas Knot, President of the Bank of the Netherlands, since they both represent opposite ends of the hawk-dove spectrum in the ECB’s Governing Council, thus helping to narrow the discussion.

According to their most recent statements, they both agree that June could be the scene of the first cut, barring major surprises.

However, the conversation is quickly shifting towards the number of cuts.