Europe | A hawkish cut

Summary

No major news has come out today as the rate cut was universally expected and the ECB does not want to pre-commit to the path of future cuts. We still expect two further cuts this year, in September and December, if there are no major surprises in the outlook for inflation during the rest of the year.

Key points

• Key points:
• The ECB cut key interest rates by 25bp, as universally expected, but gave no clues about the path of further rate reductions
• Growth and inflation forecasts have been revised upwards, reflecting recent data surprises. This makes today’s move a “hawkish cut”; but the medium term outlook remains broadly unchanged
• The ECB remains on a “data dependent” mood. We expect two further cuts this year

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