There were no major shocks from the ECB today

There were no major shocks from the ECB today, with the Governing Council delivering yet another 25 basis point interest rate cut, the sixth in as many meetings.

Market participants were, however, left with the feeling that the path ahead for policy has become increasingly less certain. The new phrase that describes monetary policy as “meaningfully less restrictive" is a highly significant one, as this suggests that rates may now not be too far away from neutral levels.

Policymakers will undoubtedly welcome the progress being made towards greater fiscal spending in Europe, particularly efforts to loosen the debt brake in Germany.

This should ease the burden on the ECB to prop up economic activity in the bloc and, we believe, may lessen the need for an aggressive pace of cuts from here on out. We now see a very real chance that the bank pauses the cutting cycle at the next meeting in April, and markets appear to be in agreement.

Yet, with European bond yields on the way up again, and growth uncertainties continuing to abound from Trump’s tariffs, we think that it would be remiss of the ECB to have signalled such a pause at today’s meeting.

Lagarde and co. appear to be keen on keeping their options open, which strikes us as a very sensible approach in the current uncertain environment.