Lane Confirms That Additional Rate Cuts Are Embedded In The ECB’s Baseline Scenario

An excerpt from Chief Economist Lane’s speech confirms that additional rate cuts are embedded in the ECB’s baseline scenarios: “The baseline projections reflect the market yield curve, which envisages a set of rate cuts in 2024 and 2025.”

• Nonetheless, he joined previous ECB speakers in stressing the Bank’s data dependent approach, and non-commitment to a particular rate path.
• As such, STIR markets have been more sensitive to the ongoing French political uncertainty/speculation, with Euribor futures seeing a small bid alongside core FI this morning.
• ECB-dated OIS are generally little changed, showing 32bps of cuts through the remainder of ’24 (vs 31bps this morning).
• Separately, in relation to the Eurozone GDP deflator (3.6% Y/Y vs 5.1% prior), Lane noted that “The ongoing compression of unit profits will play an important role in keeping the disinflation process on track, even while the final stages of catch-up dynamics mean that wage growth remains elevated this year”.