In recent years, the ECB Council has rarely appeared as united in public as when it was asked about a first interest rate cut in spring 2024. The nuances of the tone differ, but both the advocates of a restrictive monetary policy (hawks) and the supporters of a more loose one (pigeons) are clearly against a rate cut in the coming months. According to the monetary authorities at the European Central Bank (ECB), thoughts of this are either "childish", "science fiction" or "premature". There was no talk at all about interest rate cuts, said ECB President Christine Lagarde at the press conference after the interest rate decision when asked. Despite the unity and the clear tone, the financial markets have already priced in an initial easing for March or April at the latest.

It is certainly a problem for the ECB that investors do not believe its statements. The expectation of an imminent interest rate cut is easing financing conditions, which in turn makes it more challenging to return to the ECB's 2 percent inflation target.

Their own predictions are counterproductive for the markets as well. The more long-term interest rates decline in anticipation of an early monetary policy easing, the less probable it becomes for interest rate cuts to happen in the near term under these conditions.

Consumer expectations in the Eurozone are also currently increasing price pressure. They do not believe that the ECB will come close to the inflation target within a year. For October 2024 they predict a median inflation of 4%. That is significantly more than the November inflation rate of 2.4% and also significantly more than the ECB forecast, which is now 2.7% for 2024. If consumers shift spending from the future to the present whenever possible in anticipation of high inflation, this increases inflation. A self-fulfilling prophecy.

The ECB underestimated inflation for a long time. Lagarde had dismissed the rise in inflation at the end of 2021 as a “temporary” phenomenon that would virtually disappear on its own. To be fair, at the time she had no idea about the Russian attack on Ukraine that would soon follow and the consequences of the war for energy prices. However, even without the outbreak of war, the ECB would have fallen well short of its inflation target over a longer period of time. The very high inflation of the past few years has damaged the credibility of the central bank, especially among consumers. The ECB now has to regain laboriously the trust it has lost. Otherwise, the price stability target will be even more difficult to achieve than already – in this interest rate cycle, as well as in the following ones.