ECB rate cuts not a linear downward path, Lagarde says
UK unemployment rises in April to 4.4%, its highest level since September 2021
Despite starting to lower borrowing costs last week, European Central Bank interest rates will not go further down in a linear path and the central bank could at times wait more than one meeting before cutting them again, ECB president Christine Lagarde said in an interview. Downplaying the narrative that a series of cuts is on the cards, Lagarde said it “does not mean that interest rates will now move downwards in a linear fashion”.
The ECB lowered interest rates by 25 basis points on June 6, taking the rate on its main refinancing operations, or refi rate, to 4.25%. That was the first rate cut since 2019 and a rare occasion when the ECB acted before the US Federal Reserve in raising or lowering interest rates.
Meanwhile, in the US, inflation eased more than forecast in May, data published by the Bureau of Labour Statistics showed on Wednesday. The consumer price index (CPI), a broad measure of inflation based on the prices of a basket of goods and services consumed across the country, remained unchanged in May compared with April, albeit registering an annual increase of 3.3%. Economists had expected a 0.1% monthly gain and a 3.4% annual increase.
The monthly rate had risen by 0.3% in April, while the annual increase was 3.3%. On a core basis, that is, excluded volatile food and energy prices, the so-called core CPI increased by 0.2% on the month and by 3.4% from a year ago, compared with respective economists’ estimates of 0.3% and 3.5%. After the release of the CPI figures, the Federal Reserve announced its widely expected decision to leave interest rates unchanged.
Finally, in the UK, the unemployment rate unexpectedly rose to its highest level in two-and-a-half years, data published by the Office for National Statistics showed on Tuesday, amid a heated general election campaign in which the economy is a key issue.
The UK unemployment rate in the three months ended April rose to 4.4%, up from 4.3% in the three months ended March and the highest level since September 2021. Economists had forecast that the unemployment rate would hold steady.
Separate research by the Chartered Institute of Management indicated that, despite the economic recovery, UK employers are seeking to make employees redundant, blaming worsening revenues or rising costs, organisational restructuring to reduce costs and increased economic uncertainty.
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