September Cut, October Pause
- The ECB will cut the deposit rate by 25bp at this week’s meeting.
- Having previously indicated that the trajectory for policy rates is lower provided that incoming data supports the baseline scenario, the weakening growth outlook and signs of moderating wage pressure provide sufficient cover for the ECB to cut.
- We would not expect any signs of the ECB pre-committing to another cut in October as with inflation close to target there is no urgency to do so. Moreover, indications of back-to-back cuts would undermine President Lagarde’s previous assertion that policy rates will not necessarily move lower in a linear fashion, in turn triggering a dovish re-pricing that would be at odds with the ECBs cautious approach to normalisation.
For the full publication, please see:
ECB Preview September 2024.pdf
