A key takeaway from next week’s ECB Governing Council meeting is expected to confirm the current mainstream ECB claim that the ECB is on track to cut interest rates in June. Although this meeting will be considered an interim meeting and market reaction may be limited, the ECB has made clear its intention to cut rates by 25 basis points in June with explicit guidance. Expected to show commitment. We do not expect further guidance on the pace of rate cuts or the final stage of the tightening cycle.
The market is pricing in a 1bp rate cut at next week’s meeting and a 23bp rate cut in June. Our base case for three 25bp rate cuts this year remains in place, but note that with underlying inflation strong, the risk is skewed for the ECB to cut rates below that this year.
