ECB’s Wunsch: July rate cut is not a done deal

  • We are going with at least two rate cuts this year, barring any bad news
  • We still want policy to remain a little restrictive
  • Cutting rates again in July could be interpreted to mean we are going to cut at every meeting
  • And that would lead to repricing that might go too far
  • July decision should be about managing expectations
  • I’m very comfortable with rate cut in June
  • But if we only do two or three rate cuts, then should not communicate that at every meeting
  • Would be very surprised if ECB does more than 25 bps rate cut in June

This fits with the ongoing narrative and market pricing for the most part at least. A move is June is set in stone unless there is a major surprise. As for what comes next, the ECB is trying to allude to data dependency. So, we’ll see.

This article was written by Justin Low at www.forexlive.com. Source