ECB review: A ‘wide open’ September meeting

Today, the ECB held its policy rates unchanged, as unanimously expected by markets and analysts. The central bank did not send any signals for the September decision, where it repeated its call for a data-dependent and meeting-by-meeting approach. During the Q&A, Lagarde said that the “question of September and what we do in September is wide open”, although markets do not share that view, pricing a 25% rate cut probability at 80%. We find the 2025 pricing of 84bp on the slightly dovish slide of expectations. We expect four more rate cuts by the ECB until end-2025.

Nothing (really) new…

As widely expected, the ECB meeting did not carry new policy signals. We did not expect that either given the limited new information that the ECB has received since the June ECB meeting. The decision statement was balanced with a key paragraph to both the dovish and the hawkish camp of the ECB. The statement read; “While some measures of underlying inflation ticked up in May owing to one-off factors, most measures were either stable or edged down in June”, as well as, “domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above the target well into next year”. The inflation assessment was largely unchanged, yet we took note of the slight adjustment in the risk picture for growth, which is now titled to the downside (in June it was balanced in the short-term and to the downside in the medium-term). During the press conference Lagarde said that arguments on the “one hand and on the other hand” were discussed, thus leading us to conclude that this will be remembered as a stock taking meeting. With no new policy signals, Lagarde ended the press conference with greetings for the “vacation and summer break”.

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