So often you don't hear central bankers say: “I am irrelevant.” Yet those words came from Christine Lagarde, president of the European Central Bank, on Thursday during her press conference after an ECB board meeting in Frankfurt.
She responded to a press question about a recent internal employee survey into her performance, set up by the ECB union. In the survey, more than half of the respondents say they consider their performance to be “poor” to “very poor”. Many respondents do not support the monetary policy under her leadership. Lagarde is also said to be authoritarian and she would use the ECB for her personal career.
The ECB has measured more than 4,000 ECB employees in FTE and just under 5,100 if you include part-timers and trainees. 1,100 people took part in the survey. More than 60 percent participate in the ECB's official employee surveys, Lagarde said. And it always shows that people are very proud to work for the ECB.
And herself? “As far as I am concerned, I am irrelevant,” she said, “as long as I manage to properly lead this institution full of talented people.” She also said she was “proud” of the ECB staff.
It remains to be seen in the near future whether internal criticism of Lagarde will continue. The trade union, IPSO, is controversial within the ECB tower and is not supported by many employees. Within the 26-member ECB governing council, the Frenchwoman enjoys respect because she succeeds in keeping board members from 20 countries in line – something in which her predecessor, the Italian Mario Draghi, was less strong.
“Irrelevant” sounds like carefully rehearsed modesty from the mouth of the ambitious Lagarde. Because, as at every press conference, the attention of many investors and financial journalists was focused on her.
The question on the financial markets: when will the central bank led by Lagarde cut interest rates?
Since mid-2022, the ECB has raised interest rates sharply to tame inflation. Raising interest rates is the classic method for central banks to do this. The higher the interest rate, the more expensive it is for consumers and businesses to borrow money, which depresses economic activity. This should curb price increases. The main ECB interest rate, the deposit rate for banks, went from minus 0.5 percent in July 2022 to 4 percent now.
Inflation in the euro zone, which peaked at 10.6 percent on an annual basis in October 2022, has now fallen to just under 3 percent. The ECB's inflation target of 2 percent is in sight. That is why the first interest rate cut in a long time is the theme on the financial markets.
But when will that happen? Until recently, many investors expected a speedy ECB interest rate cut, in April or even in March. In anticipation of this, interest rates on the capital markets have been falling since last autumn, with mortgage rates in their wake, as home buyers in the Netherlands have noticed. falling rates.
Carefully
But the ECB is cautious and has actively pushed back investor expectations in recent weeks – and Lagarde did so again on Thursday, albeit gently. It must first become clear that that 2 percent will actually be achieved and that inflation will remain at that level “sustainably”, Lagarde said. The ECB needs more “data” for this, she repeatedly repeated, including on wage increases, which have recently been an important source of inflation. Because the higher the wage costs of employers, the higher the product prices.
Investors, and also financial journalists, are less concerned with data than with a date. When will that interest rate cut come? Lagarde recently called an interest rate cut in the summer “probable” during the World Economic Forum conference in Davos. That would indicate June, at the earliest.
On Thursday she said that she stands by these words – but not all market parties appeared to be impressed by this. ABN Amro and ING follow Lagarde: both banks mentioned the June ECB meeting on Thursday afternoon as the earliest moment for an interest rate cut. But Deutsche Bank and currency specialist Monex Europe, among others, stuck to April after the press conference. They think that inflation and economic growth will fall faster than the ECB itself now expects, which means that interest rates will also have to fall faster.
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