• • ECB still pressured between rising inflation and weaker growth, but...
  • • …Inflation peak in February and weak Q4 GDP growth data may increase room for manoeuvre from March meeting onwards
  • • We still see two rate cuts by 25 bps in March and June
At the February policy meeting, the ECB governing council is widely expected to leave rates unchanged at 4% for the 8th consecutive month. Market expectations towards an easing in policy have increased dramatically since the previous meeting however and now discount almost three rate cuts for 2008. The main question for this meeting is whether the ECB will soften its hawkish language and eventually drop its tightening bias.