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ECB: Weekly ECB Speak Wrap (Nov 25 - Dec 2)

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The key piece of ECB-speak last week was Executive Board member Schnabel’s interview with Bloomberg. Schnabel, considered a hawkish-leaning but influential policymaker at the ECB, pushed back against market pricing for rates to be cut below neutral (which she estimates as between 2 and 3%). 

  • Her comments also seemed to downplay the probability of a 50bp cut in December, “I have a strong preference for a gradual approach”.
  • On the other side of the spectrum, Banque de France Governor Villeroy came out with much more openly dovish remarks than his previous comments.
  • The MNI Policy Team’s latest sources piece emphasised that the main debate ahead of the December meeting is probably around any tweaks to the ECB’s guidance, specifically the bank’s pledge to keep policy “sufficiently restrictive” until inflation reaches target.
  • Schnabel and Nagel both downplayed the weak November flash PMIs.
  • Meanwhile, the November flash inflation round did not show enough of a downward surprise (core HICP at 2.7% was only below consensus due to favourable rounding) to generate any meaningful repricing in markets.
  • Markets are not yet convinced at the prospect of a 50bp December cut, but on Friday afternoon, JPMorgan became the first sell-side outlet we have seen to officially call for such a move.

FULL PUBLICATION HERE: 241202 - Weekly ECB Speak Wrap.pdf

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The key piece of ECB-speak last week was Executive Board member Schnabel’s interview with Bloomberg. Schnabel, considered a hawkish-leaning but influential policymaker at the ECB, pushed back against market pricing for rates to be cut below neutral (which she estimates as between 2 and 3%). 

  • Her comments also seemed to downplay the probability of a 50bp cut in December, “I have a strong preference for a gradual approach”.
  • On the other side of the spectrum, Banque de France Governor Villeroy came out with much more openly dovish remarks than his previous comments.
  • The MNI Policy Team’s latest sources piece emphasised that the main debate ahead of the December meeting is probably around any tweaks to the ECB’s guidance, specifically the bank’s pledge to keep policy “sufficiently restrictive” until inflation reaches target.
  • Schnabel and Nagel both downplayed the weak November flash PMIs.
  • Meanwhile, the November flash inflation round did not show enough of a downward surprise (core HICP at 2.7% was only below consensus due to favourable rounding) to generate any meaningful repricing in markets.
  • Markets are not yet convinced at the prospect of a 50bp December cut, but on Friday afternoon, JPMorgan became the first sell-side outlet we have seen to officially call for such a move.

FULL PUBLICATION HERE: 241202 - Weekly ECB Speak Wrap.pdf