As growing uncertainty unfolds around the Federal Reserve’s monetary policy path, the focus shifts across the Atlantic to the European Central Bank (ECB). The ECB has decided to hold interest rates steady in its economy, with deposit rates sitting at 4% for the fifth consecutive meeting. To provide insights on this decision, Former President of the European Central Bank Jean-Claude Trichet joins Yahoo Finance.
Trichet suggests that the ECB’s message in holding rates steady is "pretty clear." He believes the central bank is "going in a good direction" on its efforts to combat inflation, and has not made any "pre-commitment" on rate cuts, which he says would have left the ECB "trapped in an overhaul of expectations" that a June rate cut would occur.
However, Trichet notes that the expectation of a June rate cut is "not a done deal," as there are many factors that could shift expectations in this "very likely uncertain" environment. He emphasizes that the ECB’s goal is to reach a 2% inflation target by 2025, and he is "confident" that the central bank is on the trajectory to achieve that.
Trichet also points out that while the U.S. is also looking to move towards a 2% inflation target, Europe is closer to reaching that goal, saying "we are not as parallel….. in the decreasing of inflation as we were perhaps before."
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