Lagarde: We Are Not Pre-Committing To Rate Path, But Direction Clear

Q: If US-Eurozone divergence in monetary policy materialises, does that mean the ECB is likely to have to ease policy more because of tighter US conditions, or does it mean you will do less because of foreign exchange markets? We have seen a 10 percent increase in oil prices in recent weeks. How much of a concern is that and could it derail a rate cut in June:

• A: We are data dependent. We will operate meeting-by-meeting. I cannot pre-commit to any route for easing.
• The price of energy going forward will have a bearing related to the lower base in 2023. The inflation decline we have seen will not be linear. We will have fluctuation around our current level until it declines to our target in mid-2025.

Q: Could we still expect a move from a restrictive season to a gradual normalisation process? On TPI, what is the impact of excessive deficit procedures on the eligibility for using this instrument.

• A: The ECB is a bank for all seasons. We cannot be tied to any season. We will be data dependent. We are not pre-committing to a particular rate path, but the direction is quite clear.
• There is a very clear press release that stands, which I won’t comment on again. The excessive deficit procedure is one of four conditions that we discuss when determining eligibility.