ECB to cut in June if disinflation remains on track

In Short

GC unsurprisingly decided not to act today: At today’s meeting the GC unsurprisingly decided to again leave key rates unchanged, the deposit rate at 4.00% and the repo rate at 4.50%. It continues with APP non-reinvestments and sticks to the previous announcement that it “intends to reduce the PEPP portfolio by €7.5 billion per month on average” over the second half of 2024 and to fully stop reinvestments at the end of 2024.


  • At today’s meeting the ECB’s Governing Council (GC) left its key rates unchanged, in line with expectations. 
  • Most importantly, it adopted a much softer language about inflation. The GC noted that wage growth was “gradual-ly moderating” while domestic price pressure was characterized as “strong” but no longer as “high”. 
  • The GC and President Lagarde in the press conference made clear that if disinflation were to continue in line with the ECB’s projections “it would be appropriate to reduce the current level of monetary policy restriction.” 
  • While “a few GC members” already wanted to act today the majority preferred to wait until the June meeting at which updated projections will be available. In the Q&A President Lagarde pointed out that inflation data will be bumpy over the coming months but that the GC is aware of that. The hurdle to derail the pivot seems to be high.  
  • We stick to our call of a first 25 bps rate cut by June 6 and continue to see cumulative cuts of 100 bps in 2024. Markets barely reacted to today’s ECB meeting leaving the expected path of key rate cuts almost unchanged.  


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ECB to cut in June if disinflation remains on track

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