Back At Pre-ECB Levels; Lagarde Cautious

Bunds are back at pre-decision levels after drifting lower through the ECB Press Conference, as President Lagarde pushed back against questions on rate cut timing.

• The cautious stance from Lagarde was broadly in line with expectations coming into the meeting.
• The ECB remains vigilant over the development of domestic inflation, wages and profits before contemplating an easing cycle. Q1 data on the latter two components will only be available by the June meeting.
• A first glance at the updated ECB forecasts shows 2024 labour productivity revised down to 0.1% Y/Y (vs 0.4% in December), meaning an upward revision to unit labour costs to 4.4% Y/Y (vs 4.1% in December).
• However, 2025 and 2026 ULCs were revised lower on an annual basis as compensation was seen moderating.
• Bunds are +21 at 133.29, after reaching an intraday high of 133.96 following the decision on the back of lower-than-expected core HICP forecasts.
• ECB easing expectations have also moderated, with OIS showing 96bps of cuts through '24 (vs a dovish extreme of just over 100bps, and 92.5/93bps pre-meeting.
• There are 22bps priced through the June meeting at typing, with just -2.5bps priced through April.