Centeno is right “in theory”, says Lagarde. “We can lower interest rates at every meeting this year. But only with strong data”
The European Central Bank (ECB) can, “in theory”, lower interest rates at all monetary policy meetings until the end of this year, said Christine Lagarde, president of the banking authority, in an interview with RTP , giving reason to what was said by Mário Centeno, Governor of the Bank of Portugal. But for this to happen, the data must give confidence that inflation will not rise again.
“In theory, what my good friend and colleague Mário Centeno says is correct. It can happen in all our meetings, but based on a strong set of data”, stressed the French leader, adding that to achieve this, data on three indicators will be fundamental: wages, profits and productivity “because they contribute immensely to the inflation of services”. “We have to be particularly attentive to inflation in services,” he said.
To the Business Journal, the governor of the Bank of Portugal, was confident that interest rates would continue to fall this year, despite not having provided concrete figures. Centeno said, like Lagarde, that the key was to have numbers that support a sustained reduction in rates.
In the same interview with RTP, Lagarde praised the Portuguese economy. “Portugal has made significant progress and magnificent results. When we look at the activity, the position of public finances, it is impressive. And I look mainly at the unemployment figures. Unemployment dropped to 6.5%. Therefore, there are many green lights in the Portuguese economy”.
“What about red lights?” asked journalist Marina Conceição: “I would mention a red sign: youth unemployment. I really hope there are public policies to help young people enter the job market. Because this is a concern”.
At the last monetary policy meeting, on June 6th, the ECB cut interest rates by 25 basis points (a quarter of a percentage point), lowering the refinancing rate to 4.25% and the remuneration rate on commercial bank deposits in the Eurosystem coffers to 3.75%. And the minutes of that meeting, released this Friday, confirmed that the decision was not unanimous. There was a decision maker who opposed this reduction.
In the opening speech of the ECB Forum, which took place in Sintra, between the 1st and 3rd of July, Lagarde explained that the fight against inflation has not been won and that the “soft landing” is not yet guaranteed. “Our work is not finished and we must remain vigilant,†reiterated Lagarde, who recognized this uncertainty as “a profound challenge for political decision-makers.
During the three days, the focus was on combating inflationbut the president of the European regulator also highlighted her concern about compliance with budgetary rules in Europe and also spoke about her concern about prices in the services sector, which remains above the target at 4.1%.
