ECB to signal no rush to cut interest rates

European Central Bank (ECB) policymakers are expected to keep interest rates steady on Jan. 25 and signal they are in no hurry to start slashing borrowing costs despite progress against inflation.

The Frankfurt institute is tipped to pause for the third meeting in a row following a historic run of hikes to tame runaway prices, leaving the benchmark deposit rate at 4 percent.

ECB president Christine Lagarde said last week rates had likely reached their peak but that it was too soon to "shout victory" on inflation, citing economic uncertainties and the possible impact of rising wages on price pressures.

She also pushed back against market bets of rate cuts as early as April, joining other ECB officials in signaling that borrowing costs would "likely" only start coming down in the summer, and if the latest economic data supported such a move.

The ECB is "in no rush yet" to change course and governors may not even discuss cuts at this week's meeting, Deutsche Bank economists wrote.

"We expect Thursday's ECB press conference to again highlight the exceptionally low possibility of a rate cut before the summer," agreed Unicredit in an analyst note.

In the United States, where investors have been penciling in a first rate cut in March, Federal Reserve officials have also been tempering expectations, indicating more work remains to be done to return inflation safely to the long-term target of 2 percent.

Atlanta Fed president Raphael Bostic last week said he saw rate reductions coming in the third quarter, or sooner if there was "convincing" evidence of inflation slowing more than expected.

After falling steadily for months, eurozone inflation reaccelerated to 2.9 percent in December.

The increase was widely...