The ECB's interest rate cut was premature. Recent inflation data has been higher than expected by the ECB. Additionally, wage agreements have shown stronger growth in the first quarter. Apparently, four Governing Council members only agreed to the interest rate cut because the central bank had publicly committed to this move in advance.

It is true that wage settlements in the first quarter were not as high as in previous quarters. However, what matters for inflation is the overall level of wage growth – one must consider both new and existing wage agreements together. Here we see that wage growth is not weakening, but rather stabilising at a high level, which is not compatible with a return of inflation to 2%.

While it is true that the pricing power of companies has decreased in recent quarters, the recovery of leading economic indicators such as the purchasing managers' indices suggests that companies' pricing power could increase again towards the end of the year.

Inflation is expected to settle closer to 3% than 2% by the end of the year. The decline in inflation for goods excluding energy and food is largely over. At the same time, prices for services are expected to rise sharply due to significantly increasing wages. Since the beginning of the year, consumer prices excluding energy and food have been rising more strongly – at an annualized rate of 3.5%. This more than what would be compatible with the ECB's inflation target.

It was noticeable how difficult it was for her not to make this appear as a contradiction. Not without reason, she responded extensively to journalists' questions. Those who want to explain understandable facts need fewer words.

Not fundamentally. The ECB can indeed hint at its direction two or three weeks before an interest rate decision. However, in March, the ECB had already brought up a rate cut in June. In April, it effectively announced the rate cut. This is not consistent with a data-dependent approach, which Lagarde has emphasised repeatedly.

A rate cut in July is completely off the table. That is clear. But in September, the ECB is likely to lower rates, provided that inflation and wages permit it.

I expect the deposit rate to drop to 3% by the first quarter of next year. After that, I do not expect any further interest rate cuts, as the ECB is likely to realize that inflation is more persistent than thought. Therefore, it cannot simply lower the deposit rate to 2%, which it sees as a neutral level. Thus, one cannot speak of a genuine interest rate cut cycle.

I would not rule that out completely. But it is not our baseline scenario.

I consider these to be bold statements. After all, the ECB's long-term inflation projections have been massively wrong in recent years. At the end of their projection horizon, which is crucial for monetary policy, they always predicted inflation of around 2%, even though it was temporarily in double digits. These long-term projections have misled the ECB into believing that the rise in inflation from 2021 onwards was temporary, so only raised interest rates in July 2022 – much too late. The central bank should learn from this mistake. Therefore, inflation projections should play a lesser role in upcoming interest rate decisions than before. Instead, the ECB should weigh current inflation data more heavily.

Obviously inflation – the core rate as an indicator of underlying price pressure, wages, and economic growth. In addition, the exchange rate and the development of commodity prices are also important.

The Fed is currently paying more attention to inflation than the ECB. That is likely to weaken the Euro against the Dollar. Nevertheless, I do not expect the Euro to fall below parity, since the Euro is already quite weak in terms of purchasing power parity.