ECB 'sticks to script' but strikes 'hawkish' tone, one final rate cut could be on the cards for end of 2025
The ECB stuck to the script on Thursday. As expected, there was no change in rates and President Lagarde repeated that the bank was both in a “good place” and a wait-and-see mode, suggesting that the Governing Council has no plans to alter policy for the time being.
We think that her tone was moderately hawkish, as she not only expressed confidence over the 2% inflation target, but said that the economy was performing better than expected, while making no attempt to talk down the value of the euro.
Barring a blowup in US-EU trade negotiations, we think that the ECB will likely stay on hold through at least the next couple of meetings.
That said, we would not be overly surprised to see one final rate cut towards the end of the year should growth remain weak, or upcoming inflation prints surprise to the downside.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
