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🏦🇪🇺Desk Commentary: ECB March Rate Decision


  • ECB President Lagarde all but completely ruled out an April rate cut, but that doesn't mean it just defaults to and is assured for June 6. Lagarde was clear the ECB remained data-dependent, not date dependent. She said the decision very much came down to the progression of wage growth and its influence on domestic core inflation. Though the headlines of Thursday's ECB meeting look dovish at first, Lagarde still cast a hawkish shadow during her press conference.

  • The ECB needs wage growth to slow and corporate profits to shrink. This is not a growth nor business friendly ECB and market looks too dovish on the policy outlook relative to Lagarde's guidance.

Deutsche Bank:

  • It won't surprise the market that the ECB is taking a meeting-by-meeting, data-dependent approach. Staff forecast revisions and a slight change in wording point to a move towards the first rate cut


  • As long as the ECB is not willing to accept that inflation is only roughly returning to target but instead pushing for an exact landing point of 2%, rate cuts should be on the agenda only at the June meeting. This is when enough data points will be available, either confirming that the inflation beast has really been tamed or pointing to renewed upward pressure on prices.

  • Only a much more alarmed ECB on the growth outlook could trigger a rate cut already in late April.


  • Not surprisingly, wage dynamics were singled out again as the crucial variable to watch. The ECB sees “signs that growth in wages is moderating” and a decline in vacancies. But more evidence was needed for the ECB to feel “sufficiently confident” and “we are not there yet”. President Lagarde highlighted several times that they ECB would have all the data needed by June, hinting strongly at the June meeting as the start of the easing cycle. Given all this, the March inflation data would need to significantly surprise to the downside to shift the timeline (April inflation data will not be available for the April meeting). We continue to expect the first rate cut to take place in June, followed by 25bp cuts at each meeting thereafter in 2024


  • Our base scenario is that the ECB will cut rates by 25bp in June, which is broadly in line with current market pricing. We think that after that, 25bp rate reductions will follow at each of the remaining policy meetings of this year, meaning a cumulative 125bp in rate cuts in 2024. We would still see this as a gradual normalisation given that the policy rates would still be at restrictive levels at the end of this year. However, financial markets are pricing in a slower pace of rate cuts after June, with cumulative rate reductions of around 95bp for this year (even considering high rate cut expectations after the statement). We therefore think that once the ECB starts to cut rates and it becomes clearer that it will move again at the next meeting, there is substantial room for more rate cuts to be priced in.


  • Unlike Lagarde, we do not yet see any significant signs of a slowdown in wage growth. The wage settlements analysed by the ECB continue to suggest that collectively agreed wages, which rose by 4.5% in the fourth quarter, will continue to fluctuate around this figure over the course of this year. The persistence of strong wage pressures may be one reason why, according to surveys, more firms in the eurozone expect selling prices to rise again

  • We expect only four rate cuts in total until the first quarter of 2025. As a result, the deposit rate is likely to fall from 4.0% at present to 3.0%. In particular, we expect fewer rate cuts in 2025 than the futures markets



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