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ECB: MNI ECB Review-December 2024: 25bp Cutting Pace Remains

ECB
Credit BulletsBundesbankEM BulletCentral Bank NewsEuropean Central BankEmerging Market NewsCEEMEAEurozoneGermanyBulletMarketsFixed Income BulletsForeign Exchange Bullets

EXECUTIVE SUMMARY

  • The ECB cut the deposit rate by 25bp as anticipated, with President Lagarde indicating that while there was some discussion of a larger cut, the smaller move was supported by the Governing Council.
  • The next focus item for markets was the updated staff macroeconomic projections, which showed downward revisions to economic growth and inflation as widely expected. The growth forecast for 2025 was revised down 0.2pp to 1.1% and inflation was nudged down 0.1pp to 2.1%. Further out, forecast inflation remained unchanged at 1.9% in 2026 before ticking up to 2.1% in 2027. The forecasts reflect the evolution of the economic and inflation outlooks since the September projection exercise, but the revisions were insufficient to warrant a shift away from the current 25bp easing pace.
  • The third element that markets were watching was the change in language concerning restrictive rates. Although the ECB indicated that policy rates are still in restrictive territory, the commitment to “keep policy rates sufficiently restrictive or as long as necessary” was removed. 

SEE HERE FOR THE FULL PUBLICATION

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EXECUTIVE SUMMARY

  • The ECB cut the deposit rate by 25bp as anticipated, with President Lagarde indicating that while there was some discussion of a larger cut, the smaller move was supported by the Governing Council.
  • The next focus item for markets was the updated staff macroeconomic projections, which showed downward revisions to economic growth and inflation as widely expected. The growth forecast for 2025 was revised down 0.2pp to 1.1% and inflation was nudged down 0.1pp to 2.1%. Further out, forecast inflation remained unchanged at 1.9% in 2026 before ticking up to 2.1% in 2027. The forecasts reflect the evolution of the economic and inflation outlooks since the September projection exercise, but the revisions were insufficient to warrant a shift away from the current 25bp easing pace.
  • The third element that markets were watching was the change in language concerning restrictive rates. Although the ECB indicated that policy rates are still in restrictive territory, the commitment to “keep policy rates sufficiently restrictive or as long as necessary” was removed. 

SEE HERE FOR THE FULL PUBLICATION