ECB more confident about disinflation but not yet considering rate cuts

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 December 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.

Highlights:

  • At today’s meeting the ECB’s Governing Council (GC) left its key rates unchanged, in line with expectations.  
  • Most importantly, the Governing Council (GC) became more confident on the medium-term inflation outlook and now even speaks of a “declining trend in underlying inflation”. And in the press conference President Lagarde ex-pressed increased confidence that higher wages eat primarily into profits and not boost inflation. 
  • That said, she also played down the importance of the GC’s wording and stated that more reassuring inflation data would be needed emphasizing again data-dependence of future decisions. 
  • Rate cuts were not discussed today. We think that the update of the growth and inflation projections by March will fuel this discussion. We stick to our call of a first rate cut by June but given the cautiously dovish tone of today’s meeting the risk of a cut before June has increased somewhat.  
  • Markets perceived today’s ECB meeting as dovish and increased the probability of an April cut from 67% to 87%. Bund yields and the EUR receded while equities reversed their morning losses. 

     

Download the full publication below

ECB more confident about disinflation but not yet considering rate cuts

The latest views, research and investment insights from the experts of our ecosystem



Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments and is considered as a marketing communication and financial promotion related to the products and services of the following companies belonging to the Generali group: Generali Investments Partners S.p.A. Società di gestione del risparmio, Generali Insurance Asset Management S.p.A. Società di gestione del risparmio, Generali Investments Luxembourg S.A. and Generali Investments Holding S.p.A. (hereinafter jointly, Generali Investments). Moreover, the website may contain marketing communication and financial promotion of products and services of companies part of the multi-boutique platform coordinated by Generali Investments Partners S.p.A. Società di gestione del risparmio, and in particular of Infranity, Sycomore Asset Management, Aperture Investors LLC., Plenisfer Investments SGR, Lumyna Investments, Sosteneo Infrastructure Partners SGR, Axis Retail Partners S.p.A. and Generali Real Estate S.p.A. Società di Gestione del Risparmio