The meeting is over and the Euro reversed lower initially after the ECB interest rate remained unchanged at 5.50% and some weaker projections for the years ahead, but now EUR/USD has popped back up trading near the highs again. Probably it was Lagarde’s comment saying that the ECB is confident that inflation is falling but not sufficiently confident.

The European Central Bank (ECB) revised its inflation projections downward for 2024, citing decreasing energy prices as the primary factor. The new inflation projection for the year is 2.3%, down from the previous forecast of 2.7%. Projections for inflation excluding energy and food have also been revised lower. These changes suggest a potential for interest rate cuts by the ECB, possibly as early as the April 11 meeting but more likely at the June 6 meeting.

ECB announces their latest monetary policy decision – 7 March 2024

• Main refinancing rate 5.50% vs 5.50% expected
• Prior 5.50%
• Deposit facility rate 4.00% vs 4.00% expected
• Prior 4.00%
• Marginal lending facility 4.75%
• Prior 4.75%
• Since last policy meeting in January, inflation has declined further
• Core inflation projections revised lower to 2.6% for 2024, 2.1% for 2025 and 2.0% for 2026
• Economic growth projection revised lower for 2024 to 0.6%
• Economy to then grow at 1.5% in 2025 and 1.6% in 2026
• Determined to ensure that inflation returns to 2% medium-term target in a timely manner
• Interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal
• Future decisions will ensure rates will be set at sufficiently restrictive levels for as long as necessary
• To continue data-dependent approach to determining the appropriate level and duration of restriction
• Full statement

The ECB noted that since the last policy meeting in January, inflation has further declined with Core inflation projections revised lower for the next three years, with projections of 2.6%, 2.1%, and 2.0% respectively. Additionally, economic growth projections for 2024 have been revised lower to 0.6%, followed by growth rates of 1.5% in 2025 and 1.6% in 2026.

The ECB reiterated its commitment to ensuring that inflation returns to the 2% medium-term target in a timely manner. Interest rates are stated to be at levels that, if maintained for a sufficiently long duration, will contribute substantially to achieving this goal. Future decisions will be made to ensure that rates are set at sufficiently restrictive levels for as long as necessary, with the ECB continuing to adopt a data-dependent approach to determining the appropriate level and duration of restriction.

EUR/USD Live Chart