Terminal Rate Expected in June or July
Centeno mentioned that the ECB could reach the peak interest rate in June or July while closely monitoring the inflation outlook.
Smaller Adjustments Continue as Monetary Policy Peaks
Although the monetary policy has peaked, Centeno indicated that smaller adjustments are still being made.
Rates Expected to Lower in 2024, Policy to Remain Tight
After completing the adjustments, Centeno stated that ECB policy would remain tight without raising rates. Interest rates should start decreasing during 2024.
ECB Slows Pace of Interest Rate Increases
The ECB reduced the pace of its interest rate increases to 25 basis points, signaling further tightening as it continues its battle against inflation. Markets predict an additional 40 basis points increase for the 3.25% deposit rate.
International Price Drops May Reduce Consumer Prices
Centeno expects the significant declines in international raw materials, metals, and food prices to result in a sustained reduction in consumer prices.
Euro Zone Inflation Accelerates, Core Inflation Eases
Eurozone inflation increased to 7% last month, from 6.9% in March, far above the ECB's medium-term 2% target. However, core inflation, excluding volatile food and fuel prices, eased unexpectedly.
Inflation Reduction Process Aims for 2% Target
Centeno emphasized the need for a reduction in inflation that aligns with the medium-term target of 2% by the end of 2024 or the beginning of 2025.