No interest rate cut in sight - Lagarde puts financial markets in a rally mood

No interest rate cut in sight - Lagarde puts financial markets in a rally mood

According to a report by www.n-tv.de, the President of the European Central Bank (ECB), Christine Lagarde, has dampened hopes of an imminent key interest rate cut in the euro zone. Interest rates should only be lowered when inflation reaches the 2 percent target again. Lagarde said she could not give an exact date, but if inflation reached the 2025 target and this was confirmed in the coming months, she was confident that interest rates would fall. This has unsettled investors who had hoped for a rate cut in the spring.

This statement from Lagarde could lead to increased volatility in the financial markets in the short term, as many investors had speculated on a rapid reduction in interest rates. A delay in the rate cut could also have an impact on certain sectors of the economy, particularly the real estate market and the consumer sector. Lower interest rates can encourage lending and investment, while higher interest rates can curb spending.

Lagarde also highlighted the importance of recent wage developments, which are above inflation, and suggested that the euro zone is in a catch-up phase. This development could have long-term implications for monetary policy and economic growth.

Lagarde's comments on the US presidential election and the possible impact of Donald Trump's re-election could also create uncertainty in markets, particularly regarding trade policy and geopolitical tensions.

Overall, the ECB's reluctance to cut interest rates and emphasis on other economic and political factors could create short-term uncertainty in financial markets, while long-term effects on economic policy and growth will depend on further developments.