Today’s rate cut by the European Central Bank came as no surprise after months of messaging from its president, Christine Lagarde made it an all-but-done deal. What vexes many observers is how and why this decision was made at the same time the ECB raised its inflation forecasts for next year to 2.2%, above the bank’s 2% target. Does this mean the ECB is now looking past inflation’s failure to hit target and will continue to cut rates this year?
Lagarde made it clear there is no pre-set path for more rate cuts: the ECB will be data dependent (what central bank isn’t these days?), wages which she noted are difficult to analyze across diverse EU nations, will be watched closely, and officials are ‘not pre-committing to a particular rate path.”
Former Bundesbank President Axel Merk just days ago that the ECB would be making a mistake if it started cutting interest rates now, relying too heavily on flawed inflation forecasts and ignoring economic and geopolitical realities. So why did Lagarde and team do this? What do they see that so many others don’t?
Enter Irene Finel-Honigman.
She started our conversation today saying this is an historic move by the ECB not only because they took the initiative to move before the Federal Reserve makes its first move to cut rates in the post-pandemic cycle. |
But more importantly because the context of this step being taken on June 6. “It’s an extraordinary day. It’s then 80th anniversary while Europe is actually again in a war situation and has a war on its borders.” She says the ECB making its rate cut today, and with EU parlimentary elections about to start, is in a way a boost of confidence that despite all of the EU’s challenges, it is moving forward,
Here’s a bit more about Irene. Adjunct Professor of International Affairs in the International Finance and Economic Policy concentration since 2008 and the European Institute 2001-2008, teaches International Banking, EU banking and policy courses. She has consulted for US and European corporations, lectured on European financial, policy, history and US-EU relations at the French Consulate, Royal College of Defense Studies, British Trade Office, National Committee on American Foreign Policy, Paris American Club, SUNY Global Center.
Previous positions include Senior Advisor on Finance Policy, U.S. Department of Commerce during the Clinton Administration, Chair of Foreign Languages, New School for Social Research, Director of French Programs, Credit Lyonnais and has taught at Georgetown, Johns Hopkins and CUNY. Born in France, she holds a PhD from Yale University and a BA from Barnard College.
Yes she knows who her EU stuff.
And here’s what she sees now. She is such an eloquent speaker and thinker. Take thte time to hear what she has to say.
And if you want afterwards to read her veiws as well, here’s the (not edited at all) transcript.
. Welcome to Central Bank Central. I'm Kathleen Hayes today. The European Central Bank, as widely expected, cut its key rate for the 1st time in 5 years, from 4 point O. To 3.7 5.
32
00:02:46.800 --> 00:03:02.269
Kathleen Hays: What made just as much news, however, just as many headlines, is the fact that the European Central Bank did this as it raised its inflation. Forecast for 2024 for 2025, 2026. So what is the message here.
33
00:03:02.370 --> 00:03:20.950
Kathleen Hays: so many, so many topics, so many parts of this to look at. So I'm very happy to have here on Central Bank Central for the 1st time about time. Irene Finlan Irene is an adjunct professor for International Affairs at Columbia University, Sepa. The School for International and Public Affairs. Irene welcome.
34
00:03:21.360 --> 00:03:27.397
Irene Finel-Honigman: Thank you and thank you so much for inviting me on this program. I I appreciate it. It is an exciting day.
35
00:03:27.660 --> 00:03:44.129
Kathleen Hays: It certainly is. And even, and that was, it's interesting how something that was, hey? It's been written down for a while. They signaled, you know, Vcb did president Christine Lagarde did at previous press conferences that a June rate cut is is in the works.
36
00:03:44.400 --> 00:03:52.829
Kathleen Hays: What's the message here, though, if they're cutting rates, just as they're saying, you know, inflation isn't going to come down as much or as quickly as we thought.
37
00:03:53.140 --> 00:04:03.320
Irene Finel-Honigman: I still think it's it's a what sort of called a historic message. 1st of all, because it's so unusual that the Ecb takes the initiative before the fed
38
00:04:04.069 --> 00:04:31.429
Irene Finel-Honigman: and that has been sort of a rather astonishing move for Christine Lagow, who is known for being extremely cautious and very careful, almost following footsteps of the fed this time to come out on the forefront. So I think this is one factor the other thing. And I realize this is not directly linked to the cut. And yet it is the context of it happening on June 6.th
39
00:04:32.251 --> 00:04:38.580
Irene Finel-Honigman: It's an interesting time. This is D-day. It's an extraordinary D-day. It's the 80th anniversary.
40
00:04:38.840 --> 00:04:46.010
Irene Finel-Honigman: while Europe is actually again in a war situation and has a war on its borders.
41
00:04:46.020 --> 00:04:51.080
Irene Finel-Honigman: The other issue is, this is the week when EU parliamentary elections start.
42
00:04:51.510 --> 00:05:17.490
Irene Finel-Honigman: and the fact of this occurring at this time is in a way a boost of confidence. It's in a way, a message saying that despite the challenges, and there certainly are, as she has mentioned herself, the inflation challenge, the challenge of EU lacking and competitiveness. Some of the issues of demographics there are definite challenges moving forward. Yet
43
00:05:17.520 --> 00:05:21.469
Irene Finel-Honigman: this is a message that we have already accomplished a great deal.
44
00:05:21.530 --> 00:05:25.599
Irene Finel-Honigman: We seem right now we appear to be on a positive path.
45
00:05:25.820 --> 00:05:52.549
Irene Finel-Honigman: and we as Europeans, and as the European Central Bank, have decided to take this initiative. So I think there's a message of confidence in what the Ecb is doing, what the overall, at least in the short term, and maybe maybe in the medium term. Economic prognosis is, and that might or might not. But certainly it is somewhere there in the psychological makeup of how Europeans will view the economy.
46
00:05:52.610 --> 00:05:54.830
Irene Finel-Honigman: I think those are factors.
47
00:05:54.830 --> 00:06:07.450
Kathleen Hays: So you're saying that you think this will potentially, and Christine Lagarde and her colleagues may be hoping, betting that if they're at a point where they can make a cut in that key rate that
48
00:06:07.520 --> 00:06:23.839
Kathleen Hays: the the Germans who just had new orders that were supposed to rise and fell other countries where there are definitely weaknesses and definitely downward pressures on growth. It's been kind of a tough time for the EU. That this will.
49
00:06:23.920 --> 00:06:28.770
Kathleen Hays: This is something they'll say. Gee! It can't be so bad if the Ecb is cutting rates.
50
00:06:29.450 --> 00:06:57.030
Irene Finel-Honigman: I think that's right, and we see it already. Some of the headlines that it looks like Ipos will get a boost this summer if they, the rates are cut the assumption that there are new deals plus, for example, both France and Italy. We see an increase in stock market listings this. Actually, the the stock 600, the EU stock 600 has gone up 10% this year. This can move it even further up. Now
51
00:06:57.030 --> 00:07:06.390
Irene Finel-Honigman: the problem is, and this is where I think, Christine I got has been so so careful and so smart in that way is that inflation.
52
00:07:06.390 --> 00:07:27.400
Irene Finel-Honigman: even if it comes down, is not always necessarily reflected in society, it's not necessarily reflected on the ground. And so this is where we may still see some rather painful disconnects between political responses and between what? What the data and what the economy shows us as a as a positive step forward.
53
00:07:27.770 --> 00:07:30.429
Kathleen Hays: Well, we've already had, you know the
54
00:07:31.070 --> 00:07:32.316
Kathleen Hays: as November
55
00:07:33.260 --> 00:07:41.850
Kathleen Hays: noted economist noted Bundesbank chief at one time, and of course the Bundesbank has always been the leader
56
00:07:41.980 --> 00:08:06.900
Kathleen Hays: around the world, and certainly in Europe for its more strictly against inflation. What you call a hawkish stance. He wrote a piece of this out in Project Syndicate in the last 24 h, where he said that it's very difficult to forecast the path of inflation. Now there's a lot of uncertainty, and the risk is that they are moving too soon. And let's also remember that to a certain extent, you know, the Ecb's chartered
57
00:08:06.900 --> 00:08:15.299
Kathleen Hays: originally was supposed to sort of mimic the Bundesbank. So this cut-in rates doesn't seem consistent.
58
00:08:15.784 --> 00:08:34.380
Kathleen Hays: Oh, so dominating the the the decision, then what is it? How much is politics, this broader EU politics? How much is a sense that they're on the right track. Inflation is gonna come down more slowly. But we're still. We're still in the kind of you know, Bundesbong historical stance of, we're going to get inflation to 2%.
59
00:08:34.530 --> 00:08:57.460
Irene Finel-Honigman: I think that that's it. There seems to still be a sort of hopeful sense, and and that's absolutely correct. Any issue of inflation almost going in anyway, above the sacred 2% as listed in almost the the charter of the the Bundespan. Certainly the Ecb. Which became the basis of that hawkish policy. From the bundespan.
60
00:08:57.854 --> 00:09:10.079
Irene Finel-Honigman: Definitely, there is still that sort of of trauma of extreme nervousness, or we may be ignoring what could be negative signs in terms of inflation coming down. However.
61
00:09:10.080 --> 00:09:29.250
Irene Finel-Honigman: I think the message here is, we have seen enough positive indicators that we feel we're on the right path, and I thought she was very careful by making it clear. This in no way commits the Ecb. To moving any further or any faster. They may, in fact, just now stay put
62
00:09:29.731 --> 00:09:54.220
Irene Finel-Honigman: the next time around they may completely pause, wait and see what the whole situation looks like, and where the the fed goes, etc. So I I think right way. Yes, it's a balancing game. I understand. Of course, Alex Davis position has always been sort of extremely hawkish, historically and interestingly enough, Germany is, in fact, the one country that is lagging
63
00:09:54.750 --> 00:10:16.799
Irene Finel-Honigman: Germany is the one country where we've seen drops in productivity. According to the latest Imf report, a Germany lacks competitiveness of productivity still enmeshed in too much red tape. And so we have a country, and this is a very odd situation in Europe, because we have to remember that Germany was always the economic engine.
64
00:10:17.258 --> 00:10:29.930
Irene Finel-Honigman: Germany was the lead power in the sense of European competitiveness, export strength, etc, that has become much more wobbly in the last year, if not year and a half.
65
00:10:30.512 --> 00:10:53.670
Irene Finel-Honigman: Much weaker leadership in Germany, very fractured with this coalition that can't seem to get itself together. In a way we I know that Angela Merkel has occasionally been now criticized. But personally, I think we sort of miss her at this moment. Very strong pragmatic leadership that was globally respected. This is another problem.
66
00:10:53.680 --> 00:10:59.569
Irene Finel-Honigman: We do not have right now strong leadership coming out of Germany.
67
00:10:59.700 --> 00:11:26.309
Irene Finel-Honigman: This is a factor that plays into this sense and into the reality of a certain amount of economic if not weakness. It's still a very strong, very stable economy. But still it does not project the type of strength, particularly in exports. We just saw today their car exports, which is one of their major industry car machine parts chemical. Their car exports are suffering from extreme competition.
68
00:11:26.310 --> 00:11:29.810
Irene Finel-Honigman: Chinese Us. And are having a problem in the Chinese market.
69
00:11:29.810 --> 00:11:30.860
Kathleen Hays: No epic.
70
00:11:31.110 --> 00:11:49.700
Irene Finel-Honigman: These factors all play into. Yes, the assumption, you know. Maybe things aren't that great. Maybe we should look at the broader economy where the problem. On the other hand, we do see a lot of strength now coming out of France, and, interestingly enough, even the Italian economy, under a
71
00:11:49.800 --> 00:12:01.409
Irene Finel-Honigman: unusually complex arrangement of sort of extreme right moving to center right government with baloney yet more economic stabilization. So it's a very mixed bag.
72
00:12:01.810 --> 00:12:21.669
Kathleen Hays: So so in a way that i i i listen what you're saying. Wonderful overview starting with the fact that this is, you know. D-day, the 80, a big, a big deal, certainly around the world, and and definitely in Europe. And the the perhaps the symbolic aspect of this at the same time. Does does this rate move suggest that?
73
00:12:22.000 --> 00:12:47.570
Kathleen Hays: the Ecb, maybe led by Christine Lagarde, is a bit more worried about growth, particularly while the the strongest, biggest, not the strongest now, but the biggest economy of Europe has been showing, you know, off and on, negative year over year growth and off and on, sometimes positive, sometimes negative, again the monthly growth is this quietly assigned that at this point
74
00:12:47.950 --> 00:12:58.390
Kathleen Hays: this has become the bigger risk that that maybe they don't do enough, and that it's a little bit better to risk, maybe a slower decline in inflation
75
00:12:58.742 --> 00:13:03.730
Kathleen Hays: just to make sure that you give a little more, you know a little more juice to the economy.
76
00:13:03.730 --> 00:13:14.709
Irene Finel-Honigman: I think so. And I think the other factor, I I think, needs to be mentioned about Germany more than even other European countries is the issue of defense spending.
77
00:13:15.078 --> 00:13:23.199
Irene Finel-Honigman: We have to remember that the German economy grew massively for decades and decades without having the burden of defense spending or minimal burden.
78
00:13:23.370 --> 00:13:25.469
Irene Finel-Honigman: This was always the Us.
79
00:13:26.250 --> 00:13:29.600
Irene Finel-Honigman: And we are now, because of the war in Ukraine.
80
00:13:29.750 --> 00:13:37.740
Irene Finel-Honigman: We are now seeing a shift in priorities of where a number of EU countries are going to have to increase spending
81
00:13:38.256 --> 00:13:49.599
Irene Finel-Honigman: this is particularly in Germany, has deep traumatic issues attached to it, but this is one other sort of indication lurking kind of in the background.
82
00:13:50.251 --> 00:14:02.550
Irene Finel-Honigman: How much will this add on to debt? How much will this add on to responsibility and spending these are all factors, and that's why I think yes, giving right now this immediate boost.
83
00:14:02.750 --> 00:14:21.469
Irene Finel-Honigman: this kind of boost of confidence kind of headed the right way. The markets are going to respond. Well, war ipos more of a sense of. We still need to very carefully push, and the Europeans also need to push competitiveness and particularly competitiveness and technology, where.
84
00:14:21.610 --> 00:14:24.749
Irene Finel-Honigman: interestingly enough, 20 years ago, they had an edge.
85
00:14:25.080 --> 00:14:36.929
Kathleen Hays: Yeah, you you're making me think of something, a question I wanted to ask you that to a certain extent is monetary policy in Europe now, bearing the the more of the brunt being a crutch for growth instead of
86
00:14:37.010 --> 00:14:41.860
Kathleen Hays: steps like that to address, you know, real economic deficiencies.
87
00:14:43.500 --> 00:14:50.800
Irene Finel-Honigman: I think I think right now, sort of the the political and the economic are going to get more and more kind of intermingled
88
00:14:51.717 --> 00:15:09.289
Irene Finel-Honigman: and it may be very difficult to what we I used to do. In a way we said, German is very strong economy France is, in a way, taking the political lead, we we had a a sort of very clear kind of division of power in within Europe.
89
00:15:09.400 --> 00:15:14.150
Irene Finel-Honigman: This is much more complex. Now Macron is taking very
90
00:15:14.260 --> 00:15:18.370
Irene Finel-Honigman: great a major lead, but sometimes almost too much
91
00:15:18.830 --> 00:15:45.880
Irene Finel-Honigman: he has managed to push through reforms which have been extremely unpopular in France, including the Pension reform, including increasing the age, etc. But he has somehow shoved it through. This is a big plus for the French economy because they are moving forward on more listings on the other issue. That kind of plays into this. And this comes out of my Co's message is to have greater integration in the capital markets.
92
00:15:45.880 --> 00:15:59.619
Irene Finel-Honigman: to have greater integration just across Europe, so that the economies don't all the not only on paper, and theoretically they are one economy, but in reality there's deeper integration. So I think.
93
00:15:59.620 --> 00:16:05.049
Irene Finel-Honigman: you know, there's a lot of, I'd say, push and pull in every country.
94
00:16:05.516 --> 00:16:18.673
Irene Finel-Honigman: Where do you put the most pressure to reform your economy and push it forward, which may create some political difficulties, to adhere very carefully to the platform you were elected, on which may not be the answer.
95
00:16:19.580 --> 00:16:44.639
Irene Finel-Honigman: this is kind of a little bit where we are. So anything that is seen overall, although clearly their risk. And I agree here with vapor we don't know, and if inflation were, for whatever reason, to start creeping up, this could be a very bad blow for the Ecb. Because that would sort of I vindicate Vavers position. She acted too fast, however.
96
00:16:44.830 --> 00:17:01.880
Irene Finel-Honigman: at this point, considering all the policies in place and the awareness of the overall situation, including the complex political situation. I think this was the right move at this time, and again interesting from a symbolic perspective that she did in June 6.th
97
00:17:03.420 --> 00:17:27.669
Kathleen Hays: List you. You mentioned the fact. That the European Central Bank cut its key rate ahead of the Federal Reserve. That isn't what usually happens. So it makes it kind of more historic, maybe a a bigger move at the same time. You know, the Bank of Canada just cut its key rate. However, it's within target, and it seems that there's more central banks, perhaps. Certainly the Ecb. Willing to cut
98
00:17:27.670 --> 00:17:43.757
Kathleen Hays: when it hasn't gotten to target and still thinks maybe inflation is gonna go higher than they thought it would be. And even in the Us. The the Federal Reserve said, oh, we need a lot more months of data before we could cut rates. But you're clearly looking for a chance to cut.
99
00:17:44.050 --> 00:17:49.610
Kathleen Hays: is there? Is this kind of a global shift now is, are people sort of stepping back from
100
00:17:49.610 --> 00:18:11.809
Kathleen Hays: the more rules driven? This is what you have to do. Kind of policy that's evolved over the past 40 years and more willing to make this trade off for various reasons. And of course, you said in Europe the the monetary fiscal, the you know the economic and political aspects are going to be more, not necessarily join. But certainly
101
00:18:12.220 --> 00:18:16.510
Kathleen Hays: it's going on serving. One big pot has something shifted globally.
102
00:18:16.940 --> 00:18:19.289
Irene Finel-Honigman: I think some way it probably has.
103
00:18:19.853 --> 00:18:22.330
Irene Finel-Honigman: I think the shock of the wars.
104
00:18:23.021 --> 00:18:27.240
Irene Finel-Honigman: The shock of looking at a an overall World Order.
105
00:18:27.250 --> 00:18:33.479
Irene Finel-Honigman: which we, whatever was going on in the world for literally the last
106
00:18:33.760 --> 00:18:53.130
Irene Finel-Honigman: 40 50 years. Despite some serious economic shocks, we still saw a certain specific anchors, we still saw the role of the United States, the alliances. What we assume for a long time a much more of a Westernization, or at least a step toward Western
107
00:18:53.590 --> 00:19:04.099
Irene Finel-Honigman: alliances or values coming even out of Russia, we saw certainly merging markets developing and growing.
108
00:19:04.310 --> 00:19:06.829
Irene Finel-Honigman: A lot of this now
109
00:19:07.030 --> 00:19:09.659
Irene Finel-Honigman: has been really put into question.
110
00:19:10.130 --> 00:19:34.719
Irene Finel-Honigman: And there's a lot more concern. Do we have a new set of enemies? What are the chances of those who really do not at all want to neither be told by nor follow the Us. Directives to make their own alliances. Do we see other economic type of partnerships? We have the huge question mark of China, where it's really not clear, what is it they're doing?
111
00:19:35.030 --> 00:19:52.109
Irene Finel-Honigman: And because of complete lack of transparency, often a lag of even understanding what are the policies, and who are they supposed to best impact or not? So I think all of these factors create a very serious element of uncertainty.
112
00:19:52.220 --> 00:20:01.960
Irene Finel-Honigman: and you do have a sense that countries are going to, particularly major powers are going to very carefully calibrate.
113
00:20:02.130 --> 00:20:13.079
Irene Finel-Honigman: and they're sort of going to constantly look. Even if it doesn't necessarily fit into a pattern, you can no longer assume. Certain principles are absolutely written in stone. They're not.
114
00:20:13.550 --> 00:20:25.820
Irene Finel-Honigman: and I think this has created a huge sense of of anxiety and a level, but also a sense of awareness. We have to be very careful, very cautious, and calibrate, if necessary.
115
00:20:26.400 --> 00:20:43.799
Kathleen Hays: We know one time we talked about the peace Dividend right? That seems to be a thing of the past. You talked about the fact that Germany, of course, other other nations are having to increase defense spending. So could be a big question this year and beyond for the us budget deficit debates, for example.
116
00:20:44.260 --> 00:20:47.319
Kathleen Hays: but these things are not disinflationary, are they?
117
00:20:47.833 --> 00:20:51.666
Kathleen Hays: So again, this makes me think of a piece that
118
00:20:52.670 --> 00:20:58.310
Kathleen Hays: Ken Rogoff also had in Project Syndicate recently, where he's arguing that
119
00:20:58.640 --> 00:21:25.569
Kathleen Hays: Central banks were able to have this this, this stricter policy, this kind of rules based policy like John Taylor's rule. While there were that past 40 years, all these disinflationary forces, they had a nice wind at their back to be on that path. But now things are shifting, and it's gonna be much more difficult to do that. And there's gonna be a push back against this kind of thing, and he says central banks are already many of them.
120
00:21:25.570 --> 00:21:29.250
Kathleen Hays: It set suggesting a path
121
00:21:29.300 --> 00:21:35.500
Kathleen Hays: where he thinks are going to be on a path that is more inflationary. And because I have a lot to do with budget deficits, etc. How do you view this.
122
00:21:35.870 --> 00:21:46.789
Irene Finel-Honigman: Well, I think what what's so interesting is that. And and personally, I feel for the last. Certainly, since the the financial crisis, the central banks in many way have been a huge mitigating influence.
123
00:21:47.174 --> 00:22:07.710
Irene Finel-Honigman: They have been really a a a calming element no matter how crazy things got, they would still have very set policies, and they would make it clear. We're not jumping at every outside indicator and responding. On the contrary, we're going to follow our set policy and certain principles. I think this is still in place.
124
00:22:07.710 --> 00:22:31.099
Irene Finel-Honigman: None of this has changed. I think what has changed is just the level of flexibility which, in a way they've already started to have on a number of last few years, as they've taken a larger scope as they've brought upon more functions under their purview. I think under these circumstances it's a question of their being willing to look at more factors
125
00:22:31.270 --> 00:22:41.500
Irene Finel-Honigman: and exactly. And and that's where the issue with the Ecb in Europe is so crucial because of the political shift that has occurred because we suddenly see.
126
00:22:41.520 --> 00:23:07.689
Irene Finel-Honigman: and in large, basically NATO, where we suddenly see countries, Finland, Sweden, coming in, we, in other words, we see the responsibility leaning toward military expenditures which no one, no one, would have thought even possible, or in their worst nightmare, as of 3 years ago. And yet this is the reality, and so they seem to be coming more having a stronger grasp
127
00:23:07.790 --> 00:23:16.819
Irene Finel-Honigman: on what are the risks? What is the reality? And in that sense I think Christine, like Out, has up, and her group have made a very smart decision.
128
00:23:16.990 --> 00:23:19.940
Irene Finel-Honigman: This is the time to take this move.
129
00:23:20.090 --> 00:23:42.580
Irene Finel-Honigman: We're making it absolutely clear. This is not an indicator of more positive moves. We are completely aware where the risks are. And she mentioned so many times in a remarks, inflation, inflation, inflation as basically being the biggest scare and the biggest risk. I think the same thing that Jerome Powell has shown, regardless of what political pressures are to
130
00:23:42.590 --> 00:23:59.890
Irene Finel-Honigman: basically try to remain as steadfast as possible. But take into account what may be completely unexpected. You know we we always used to talk about black swans, and I've said in the last 2 years we've literally had swarms of Black Swan.
131
00:24:01.035 --> 00:24:02.180
Kathleen Hays: Yeah.
132
00:24:02.554 --> 00:24:11.920
Irene Finel-Honigman: Sort of attack. And I I think this mindset is really now a kind of a front and center for a lot of central bankers.
133
00:24:12.380 --> 00:24:13.190
Kathleen Hays: So
134
00:24:14.350 --> 00:24:26.419
Kathleen Hays: both Isabel Schnabel, who's on the Ecb board, and Claus not? Who's the head of the Dutch Central Bank, who has been known to take the war hawkers positions. In fact, when it
135
00:24:26.420 --> 00:24:47.960
Kathleen Hays: you know where there was a push to when the When the Ecb. Really hadn't started raising rates right. He was one of the voices, the push. We've got to do this. They are both already saying they do not they? They see a pause now they do not see a cut, and I obviously Christine Lagarde didn't say what we won't cut. But, she said, we're going to watch the numbers very closely. What do you think, Irene? If you had to bet?
136
00:24:48.286 --> 00:25:02.630
Kathleen Hays: Would you say, Okay, we've seen this historic move. The Ecb is set a signal, but probably for now. We're not gonna see? We're not gonna see more rate cuts. Certainly not the next couple of meetings, and maybe not this year.
137
00:25:03.100 --> 00:25:18.240
Irene Finel-Honigman: I agree. I think that's exactly it. And that was sort of the underlying message that I got from her remarks, and from looking all this information that. This was a a dramatic move. It's an important move, but we're now going to stay put
138
00:25:18.400 --> 00:25:28.199
Irene Finel-Honigman: unless some wonderful good news comes which is highly unlikely. So basically, this is probably a decision, and maybe for definitely the rest of the year.
139
00:25:29.870 --> 00:25:53.030
Kathleen Hays: The issue here, though what if it is same things true? For the fed is true for any central bank once you, you know, and that's probably one reason why the the fed, led by J. Powell have said, we're gonna wait for a lot more data, and they can afford to. Right. We don't. The economies is much better shape overall than the EU economy. Right? But if what if? What if inflation doesn't just come down more slowly.
140
00:25:53.030 --> 00:26:10.090
Kathleen Hays: You know the the, the their forecast which would they had to raise for this year? Right? What if it starts creeping up a little bit again. Do you see that in both in the economic forces, as a possibility number One and number 2, if it were to happen, does that put the Ecb. In a kind of a very uncomfortable position.
141
00:26:10.340 --> 00:26:16.980
Irene Finel-Honigman: I think it would put it, because again, it would seem to corroborate all the naysayers
142
00:26:17.429 --> 00:26:31.460
Irene Finel-Honigman: which could be a problem. However, I think it would depend a lot on a whole number of other factors. Are we seeing a tiny creep up of inflation? But meanwhile we are still seeing very stable
143
00:26:31.460 --> 00:26:47.909
Irene Finel-Honigman: better productivity. Are we seeing the banks continue to do very well, because we we have to remember that overall the banks in Europe were not affected by the prices in the Us. In March 2023, they basically remained very stable even after credit. Suisse went down.
144
00:26:47.940 --> 00:27:12.160
Irene Finel-Honigman: Didn't seem to be any any impact. They're moving forward. French banks are extremely strong. Are we going to see more consolidation and corporate and banking sectors? Are we going to see stronger impact integration, capital market. So are they going to be other indicators that are going to look, that we still have a solid, strong economy, although we do have a slight upwitch, tick and inflation which will create concern.
145
00:27:12.360 --> 00:27:16.139
Irene Finel-Honigman: and then all the more reason they will not do anything.
146
00:27:16.210 --> 00:27:20.269
Irene Finel-Honigman: It's possible the Ecb will not do anything for 12 months, or even more.
147
00:27:20.730 --> 00:27:40.033
Kathleen Hays: Wow! Well, I reached out and thank you so very much. We have covered so much ground. And I'm so glad you heard on Central Bank central today because your your breadth of knowledge, your perspective. What isn't just about what late ladies inflation numbers. And you know what's wage growth doing. It has a lot to do with these
148
00:27:40.470 --> 00:27:50.500
Kathleen Hays: political forces, historical forces where where the Ecb. In in terms of where Europe is now relative to where it was, you know, just a couple of years ago.
149
00:27:52.430 --> 00:28:00.760
Irene Finel-Honigman: Right. And I I if you love me, I just want to end on on one kind of yes, positive note, and I think somewhere. European leaders will will think of this.
150
00:28:00.940 --> 00:28:09.309
Irene Finel-Honigman: It was 80 years ago, and 80 years ago, a Europe that was a complete devastation in complete, literally obliteration.
151
00:28:09.610 --> 00:28:10.880
Irene Finel-Honigman: And when we think
152
00:28:10.900 --> 00:28:24.819
Irene Finel-Honigman: that Europe today, we have this extraordinary strong global power and global entity, and we're discussing a European Central bank rates and the importance of European economic decisions.
153
00:28:24.820 --> 00:28:42.439
Irene Finel-Honigman: There is something quite extraordinary about that in the broader historical sense of the huge resilience and ability to adapt and to recover that Europe has shown again and again, and I think maybe that is a interestingly enough, a positive note in in all of this, despite the complexities.
154
00:28:42.680 --> 00:28:57.869
Kathleen Hays: Certainly. Well, as I said, I mean, thank you, sir, very much. Everyone is an adjunct professor for International Affairs at Columbia's Sepa. That's a school for international and public affairs. And once again, Irene, I thank you for joining me today.
155
00:28:57.870 --> 00:29:01.449
Irene Finel-Honigman: Thank you so much for allowing me to talk with you. I really appreciate it. Thank you.
156
00:29:01.660 --> 00:29:03.209
Kathleen Hays: Have you back soon on Central? Thanks.
157
00:29:03.210 --> 00:29:04.900
Irene Finel-Honigman: Hope so. Thank you.
158
00:29:05.250 --> 00:29:06.550
Kathleen Hays: I'm Kathleen Hayes.
159
ECB Sends Message of Confidence on D-Day Anniversary: Finel-Honigman