The ECB’s Simkus spoke with Econostream and delivered some hawkish comments.
- For the cut in September I see a quite clear case. For cutting in October or by more than 25bp, I find it quite unlikely.
- No strong argument for 50bp cut despite weakening economy
- Market implied chances of an October cut are around a 40% probability
- “The fact that the market now attaches a fairly high probability to an October cut does not correspond to the data, in my view”
- Inflation converging to 2% target in second half of 2025
- ECB not behind the curve; policy aligned with data
- What’s clear is we have quite sluggish economic developments; if you exclude Ireland with its volatile data, growth in the second quarter was basically flat.
I wouldn’t take his comments as a sign of what’s coming but it’s clear there are some hawks around the table. We will have to wait until Sept 12 to see what the ECB signals after cutting rates.
This article was written by Adam Button at www.forexlive.com. Source