Please find below a new comment from Nadia Gharbi, Senior Economist, at Pictet Wealth Management, in reaction of today’s ECB meeting :
- The ECB decided to cut its deposit facility rate by 25 basis points (bp) to 3.25% at today’s Governing Council (GC) meeting, as widely expected. President Christine Lagarde mentioned that the decision was unanimous.
- The wording in the press statement was broadly unchanged. In particular, the sentence about the need to keep monetary policy “sufficiently restrictive” was left unchanged.
- Lagarde mentioned that the balance of risks to growth was tilted to the downside, but she was a bit more nuanced about inflation.
- As expected, the ECB remained cautious and provided little guidance on the next steps, with Lagarde emphasizing that the ECB will remain “data dependent and follow a meeting-by-meeting approach.” Today’s decision to cut by 25 bp was mentioned as “proof” of ECB’s data dependency.
- Importantly, while she did not commit to anything, Lagarde did not close the door to faster rate cuts and emphasized the importance of staff projections and the next data releases in the coming weeks.
- In all, the focus in December will be on the revision of the staff projections. We maintain our view that the ECB will cut by 25 bp at each GC meeting until June 2025, bringing the deposit rate to 2.0%. Risks are tilted towards a lower terminal rate.
