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PT Solid Gold Berjangka | ECB Officials Saw Cutting Interest Rates Too Soon as Bigger Risk

01:21 23 February in Fiscal & Monetary, PT SGB, SOLID GOLD BERJANGKA | SOLID GROUP by admin_sgb_tcc
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ECB PT SGB SOLID GOLD BERJANGKA SOLID GROUP SG BERJANGKA

Solid Gold Berjangka | Here is a summary of the recent ECB officials’ meeting and their views on interest rates, markets, inflation, wages, and the economy:

  • Interest Rates: European Central Bank (ECB) officials are cautious about a premature reduction in interest rates. They believe that cutting rates too early poses a bigger risk than cutting them too late. The current deposit rate is at a record-high 4%, and policymakers are hesitant to discuss lowering borrowing costs at this point.
  • Policy Outlook: The ECB sees progress in all three elements of their reaction function, indicating that monetary policy is working. However, officials stress the need for continuity, caution, and patience due to the fragility of the disinflationary process. They are wary of undoing progress if economic activity picks up unexpectedly.
  • Market Expectations: Markets are pricing future interest rates lower than the ECB’s projections, mainly due to expectations of lower inflation, particularly for 2024. The ECB is assessing how these lower rates might impact future growth and inflation and will carefully consider this in their decisions.
  • Inflation and Wages: Lower energy prices are expected to lead to a downward revision of inflation for 2024 in the upcoming staff projections due in March. Despite a tight labor market, the ECB is exercising caution regarding wage prospects. They want to see hard data confirming that wage growth is moderating as projected for 2024.
  • Economic Outlook: Members of the ECB acknowledge that short-term growth may be weaker than expected. However, they note that the decline in inflation has not had a significant negative impact on economic activity thus far.

Overall, the ECB remains cautious about adjusting interest rates too soon, emphasizing the need for patience and a careful assessment of economic data before making any changes. Markets are anticipating lower inflation, which is factoring into their expectations for future interest rates.

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