Accounts Affirm Expectations of June Rate Cut Step

ECB Accounts here

Accounts Highlights - all points to a June cut:

• Points to certain data only being available by the June meeting: "Having new data [on prices] and new projections for these variables was therefore important but euro area national account data for the first quarter of 2024 would only be released shortly after the Governing Council’s June monetary policy meeting."
• "It was seen as plausible that the Governing Council would be in a position to start easing monetary policy restriction at the June meeting" [...] "Members stressed the value of waiting until June for further evidence"

But data dependency remains:

• "Members stressed that maintaining a data-dependent approach with full optionality at every meeting was warranted"
• Acknowledges that Easter distorted services inflation: "Services inflation had remained unchanged at 4.0% in March, owing in part to the early timing of Easter.", which they don't expect to moderate until next year: "There was a tight correlation between wages and the inflation rate in wage-sensitive sectors, which explained why a material drop in services inflation would not be seen until 2025"

Notes easing market conditions:

• "peak restrictiveness in euro area financing conditions might have passed. Interest rates on new loans to households and firms had started to come down, primarily in anticipation of future policy rate cuts", but weakness in lending, as per last BLS: "Bank lending to firms, in particular, was seen as persistently weak. In part, this was due to lower demand for loans from firms."
• All-in-all nothing unexpected here from ECB accounts, affirms expectations for first rate cut in June before switch to data dependency thereafter. Markets unmoved - EUR/USD remains broadly flat and not far below overnight highs.