ECB’s Lagarde: Rate cut today is justified by confidence in the path ahead

  • At each and every step of the way when we decide to move, we have halved inflation
  • In October 2022, we were at peak inflation i.e. double-digit inflation
  • In September 2023, we were at 5.2% inflation
  • And today, we are at 2.6% inflation
  • Policy decision and data releases are not perfectly synchronised
  • Cannot say until much later in the summer if ECB will do something then or at another point in time
  • We need more data to constantly confirm disinflationary path

When asked about the rate cuts priced in by markets, Lagarde only had this to say: “Markets do what markets have to do, and we do what we have to do.”

The rates pricing hasn’t really shifted by much following the decision. Traders were pricing in ~64 bps of rate cuts for this year, including today, and that is now seen at ~36 bps for the remainder of the year i.e ~61 bps in total.

This article was written by Justin Low at Source