/ECB: Nomura: Market Pricing Of Cuts Is Overly Aggressive

Nomura reiterate that they “expect the ECB to leave rates unchanged at its January meeting, in line with consensus expectations. Moreover, we also think that the Governing Council is unlikely to make any other policy announcements at its January meeting.”

• “ECBspeak of late has been in “écouter et répéter” (listen and repeat) mode, underscoring the same well sign-posted timeline. That is, the ECB wishes to wait for January and February wage agreements and Q1 2024 wage growth data, and to assess how these will affect underlying momentum in domestic inflationary pressures, before considering easing policy. In our view, we will likely just get more of the same.”
• “Market pricing, in our view, is overly aggressive in terms of rate cuts – both in terms of timing (April is almost fully priced) and size (142bp for 2024 at the time of writing). Our belief is that the ECB is more likely to begin cutting only in June, allowing it more time to assess the medium-term outlook comprehensively for underlying inflationary pressures.”