Christine Lagarde is expected to give little away at the European Central Bank’s upcoming monetary policy meeting in Frankfurt this Thursday meaning markets will be left looking for subtle signs of the bank’s intentions as investors are increasingly pricing in cuts for June.   

The bank will almost certainly keep interest rates unchanged at 4%, having held them at record highs since October following a series of 10 consecutive hikes in 2023, as it pushes forward in its fight to lower eurozone inflation. 

Instead, money markets will be left looking for subtle signs of the ECB’s intentions as investors are increasingly pricing in the prospect the bank will make its first rate cuts in June. 

As of now, the ECB has pushed back against any talk of lowering interest rates, in sticking to its assertions that it will only start making cuts when the data clearly shows that inflation has started to fall to target levels of 2% across the eurozone.

New data published on Friday saw markets pare back their expectations for any imminent cuts to the ECB’s interest rates as investors took the view that current data fails to support the prospect of cuts at the bank’s April meeting

The worse-than-expected figures from the European Union’s official data provider Eurostat showed the eurozone experienced higher-than-expected inflation of 2.6% in February – down from 2.8% in January and from a peak of 10.6% in October 2022. 

In the view of money markets, this leaves the ECB’s June meeting as the earliest opportunity for rate cuts, as the bank does not have a meeting scheduled for May.

A poll of 73 economists by Reuters shows two-thirds of forecasters believe the ECB will make a 25 basis point cut in June that would see interest rates lowered to 3.75%. Markets are expecting 90 basis points of cuts in 2024, compared to the 150 expected at the start of the year. 

The ECB is, however, unlikely to give any clear commitments to any possibility of June cuts, meaning investors will be left looking for subtle signs of the bank’s intentions in Lagarde’s communications at the press conference that will follow the governing body’s meeting. 

Analysts at RBC Capital Markets led by Peter Schaffrik said they “expect the ECB to retain optionality with Lagarde likely to stress the ECB’s data dependence, and its particular focus on incoming information on wage growth.”