The ECB is also expected to publish an update to its macroeconomic outlook. Experts predict that the European central bank will not repeat the reduction in July and will wait until September for a new reduction.
The European markets are on the rise: the Ibex 35, CAC 40, DAX, as well as other European indices, are positive a few hours after the European Central Bank (ECB) announces its decision on interest rates.
As anticipated Ambitthe market anticipates that the ECB will make its first interest rate cut since 2019. For analysts, the reduction of 25 basis points is a fact, placing the deposit rate at 3.75% and the repo at 4.25%”.
This decision was questioned by the president of the organization, Christine Lagarde, and other members of the ECB, in response to the marked moderation of inflation from 10.7% in October 2022 to the current 2.6%.
‘hawkish’ trim
“We anticipate a ‘hawkish’ cut, with Lagarde possibly warning that there will not be a continuous series of cuts in the next ECB meetings,” comments the European press. Future movements will depend on economic data, especially in a context where inflation remains resilient in sectors such as services, wages and energy.
The ECB is also expected to publish an update to its macroeconomic outlook. Experts predict that the ECB will not repeat the reduction in July and will wait until September for a new reduction, as long as inflation resumes its downward trend.
Some projections
Link Securities does not anticipate a strong reaction in the bond and stock markets after the meeting, unless Lagarde surprises with her comments. They consider that the economic recovery of the Eurozone reduces the pressure on the ECB to force rate reductions.
Berenberg sees a rate cut in July unlikely, noting that everything will depend on the data. They do not expect a clear indication from the ECB on a neutral rate level, and maintain the forecast of quarterly cuts in September and December.
lagarde european bce
Reuters
Moody’s Ratings predicts a cut of 25 basis points this Thursday, given that inflation has steadily converged with the 2% objective. They foresee up to four cuts of 25 basis points in 2024, aligned with market expectations, supporting bank lending growth and providing relief to vulnerable borrowers.
Citi It also expects an aggressive cut without clear future guidance and with an upward revision of the ECB’s growth and inflation expectations. They note that the impact on bond yields could be limited, but they see a positive outcome for the euro/dollar cross. Currently, the cross is trading at $1.0880, with an initial target of $1.0980-$1.10, and potential up to $1.1120.
Source: Ambito
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