Investing.com — The European Central Bank is not likely to change policy or adopt major rhetoric changes at its January meeting next week, analysts at Bank of America Securities argued on Friday.
In a note to clients, the analysts said they believe that ECB policymakers will not begin to cut interest rates down from record highs until June, adding that signs of increasing disinflation in the eurozone could lead to “faster action thereafter.”
“We continue to think that market pricing is overdone absent unforeseen new shocks,” the Bank of America analysts said.
The commentary comes after ECB President Christine Lagard said earlier this week that price growth in the eurozone is on track to cool to the bank’s 2% target, but flagged that it was too early to declare victory over inflation.
While she did not push back against bets that the ECB will slash rates six times in 2024, Lagarde signaled that borrowing costs could start to come down in the summer — later than the springtime reductions expected by markets. Her comments further dented hopes for imminent cuts from central banks in the eurozone, U.K., and U.S.
Speaking on Bloomberg TV at Davos, Lagarde said the ECB would only have a good sense of the direction of inflation once it receives this year’s collective wage agreements in the “late spring.” Officials would then use these numbers to craft a picture of household incomes and, by extension, the path ahead for price gains, she noted.
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