- Prior decision
- Deposit facility rate 3.25% vs 3.25% expected
- Prior 3.50%
- Main refinancing rate 3.40% vs 3.40% expected
- Prior 3.65%
- Marginal lending facility 3.65%
- Prior 3.90%
- Incoming information shows that the disinflationary process is well on track
- The inflation outlook is also affected by recent downside surprises in indicators of economic activity
- Inflation is expected to rise in the coming months, before declining to target in the course of next year
- Will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction
- It will be based on the assessment of the inflation outlook, incoming economic and financial data
- Not pre-committing to a particular rate path
- Full statement
Besides the rate cut itself, there are no changes to the policy communication by the ECB. So, this makes it a rather straightforward one. It is only in the first paragraph that they alluded to “recent downside surprises” in economic data. That would be their rationale for acting in back-to-back months.
Traders are still anticipating another rate cut in December with ~122 bps of rate cuts more until June next year. That would represent a 25 bps rate cut at each meeting until then.
EUR/USD is sitting flattish still, keeping around 1.0865 and not much changed from the decision announcement. It’s now over to Lagarde to bring it home.
This article was written by Justin Low at www.forexlive.com. Source