MNI ECB Preview-October 2024: First Back-To-Back Cut

EXECUTIVE SUMMARY: October Cut: Reconciling Spot Data with Slower Moving Inflation Dynamics

• Following the weaker-than-expected PMI and inflation data, the market and many on the Governing Council have rallied behind an October cut, which appears to be the most likely outcome.
• However, communicating the motivation for such a move will not be straight forward.
• An October cut would not violate the meeting-by-meeting or data dependent approach, but is somewhat at odds with the repeated assertion that the ECB is not “data point dependent.”
• Back-to-back cuts underpinned by just a discrete number of new data points also undermines the importance attributed to the productivity-wage-profit channel, which the ECB has argued is a key determinant of the inflation outlook but which has not materially changed since September.

FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK: ECB Preview October 2024.pdf