Europe | The ECB held steady and attempted to temper expectations of early rate cuts

Summary

At today's monetary policy meeting, the ECB maintained rates at 4% for deposit facility and the main refinancing operations rate at 4.5%, aligning with market expectations.

Key points

• Key points:
• The ECB keeps rates unchanged. Rate cuts were not discussed “at all”
• PEPP reinvestments to slow in 2H24, then stop at the end of 2024
• Forecasts for inflation and growth next year were lowered with wage evolution in focus
• Today's meeting effectively countered the Fed's overly dovish stance from yesterday by signaling a cautious approach. Nevertheless, the recent unexpected inflation developments, the outlook for commodities, and the clear weakening of economic activity have led the ECB to revise down its GDP and inflation forecasts for the coming year, aligning with our predictions. The decision to expedite the conclusion of PEPP reinvestment was anticipated and has been communicated effectively.

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