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At her press conference on Thursday after the ECB meeting, President Lagarde said goodbye to journalists and listeners wishing to hear more about a ‘wait and see’ holiday, an expression widely used by central bankers to imply that the next monetary policy moves will depend on how events unfold.

Lagarde cooled expectations of another rate cut this year, reinforcing a more cautious, data-dependent stance. If the global outlook holds steady and no surprises arise in inflation or activity, the ECB may have already reached the end of its easing cycle.

The most interesting thing about last week’s ECB meeting was not the decision made, but the promise of hints as to what it might do next. Ultimately, the 25-basis point cut in the main reference rates had already been widely priced in by analysts and markets.

The ECB cut rates to 2% with broad consensus and signaled the rate-cutting cycle may be nearing its end. While confident in the inflation path, high geopolitical and trade uncertainty keeps future decisions open.

The latest meetings of the Federal Reserve (Fed) and the European Central Bank (ECB) have confirmed what was expected: that monetary policy in both regions is starting to diverge.

The ECB adopted a relatively dovish stance today while implementing the widely expected rate cut, signaling the possibility of further reductions without committing to a specific terminal level. This approach aligns with the continued progress in disinflation and the subdued momentum of the Eurozone economy.

The euro/dollar pair has fallen sharply from the highs seen toward the middle of 2024 (1.12) to reach its current level of 1.04, representing a depreciation of 8%.

As expected, today the ECB lowered interest rates by 25bp and revised down growth and inflation forecasts. Lagarde did not give many clues on the next steps but reaffirmed that the disinflationary process is on track. We maintain four more cuts for the first half of 2025 to 2% (depo).