Top-line inflation in Europe is easing, but central bankers are warning they do not expect to cut interest rates any time soon.

Bank officials want “to see companies cutting their profit margins and governments their budget deficits to be convinced inflation would fall sufficiently,” the Financial Times was told by several of the bankers.

“It’s really too early to be talking about cutting rates,” Bank of England (BoE) governor Andrew Bailey said at a conference in Dublin last week. “We’re very clear we’re not talking about that.”

Bailey’s statement followed a comment by BOE chief economist Huw Pill that it was reasonable for markets to expect a rate cut no later than the middle of 2024.

Bailey’s firm stand against cuts has been echoed recently by Joachim Nagel, president of Germany’s Bundesbank; Gabriel Makhlouf, Ireland’s central bank chief; and Philip Lane, chief economist for the European Central Bank (ECB), the FT noted.

“The ‘last mile’ before we reach our inflation target may be the hardest,” Nagel said in comments quoted by the FT. “In the current environment of high inflation, fiscal policy needs to be restrictive.”

The ECB will not cut rates until at least the second quarter of 2024, bank president Christine Lagarde said at a conference last week.

Interest-rate futures traders are ignoring such statements. Instead, they have bet that rate cuts will begin as soon as April as European economies stagnate.

The Eurozone’s economy grew a scant 0.2 percent in this year’s second quarter and shrank by 0.1 percent in the third. Some economists expect it to contract again in this quarter.

Traders’ bets actually weaken central banks’ hand against inflation, officials have said, because expectations of future rate cuts reduce the current costs to borrow.

“Bond markets are prone to price in rate cuts as soon as you get to peak rates and there’s starting to be a degree of confidence in markets that we’re there,” Michael Mathews, Invesco’s co-head of fixed rates, said to the FT. “What central banks don’t want is markets taking away [the effects of] their tightening.”

Traders have priced in three BoE rate reductions next year, up from one that was foreseen in September.

Eurozone speculators see at least a 75-percent probability that the ECB will lower rates before next May, up from 30 percent last month.

Consumer price inflation fell to 2.9 percent in October, well within reach of the ECB’s 2-percent target. Core inflation, which ignores often-volatile food and fuel costs, held firm at 4.2 percent, more than double the target rate.

“We should not assume this respectable headline rate can be taken for granted,” Lagarde warned. “Even if energy prices remain where they are, there will be a resurgence of probably higher [inflation] numbers going forward and we should be expecting that.”

TREND FORECAST: The Eurozone dipped into, then out of, a technical recession early this year and remains teetering on the edge of another.

With core inflation stuck at twice the ECB’s target rate, and wars and weather threatening to roil prices for food and energy yet again, the bank will not cut its rates at least until 2024’s second quarter.

The steadily high interest rates will push more businesses and households into serious financial straits, which is more likely than not to tip Europe’s economy into at least a technical recession, if not a full-blown one, before 2025.

We forecast that the ECB will follow what the U.S. Feds do and that is, holding rates where they are for the rest of this year and lowering them in 2024.