There were no major shocks from the ECB today
|
There were no major shocks from the ECB today, with the Governing Council delivering yet another 25 basis point interest rate cut, the sixth in as many meetings.
Market participants were, however, left with the feeling that the path ahead for policy has become increasingly less certain. The new phrase that describes monetary policy as “meaningfully less restrictive" is a highly significant one, as this suggests that rates may now not be too far away from neutral levels.
Policymakers will undoubtedly welcome the progress being made towards greater fiscal spending in Europe, particularly efforts to loosen the debt brake in Germany.
This should ease the burden on the ECB to prop up economic activity in the bloc and, we believe, may lessen the need for an aggressive pace of cuts from here on out. We now see a very real chance that the bank pauses the cutting cycle at the next meeting in April, and markets appear to be in agreement.
Yet, with European bond yields on the way up again, and growth uncertainties continuing to abound from Trump’s tariffs, we think that it would be remiss of the ECB to have signalled such a pause at today’s meeting.
Lagarde and co. appear to be keen on keeping their options open, which strikes us as a very sensible approach in the current uncertain environment.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.