Europe | The ECB leaves the door open to a pause

Summary

The ECB cuts interest rates by 25bp as inflation stays in line with expectations, but uncertainty increases ahead of April due to potential political moves in Europe and the US.

Key points

• Key points:
• After the widely expected 25bp cut today, monetary policy has become “meaningfully less restrictive”, which means the ECB is preparing its landing of interest rates
• The usual “data dependency” mantra takes on greater importance now, signaling that upcoming decisions will be particularly sensitive to new economic indicators, especially inflation
• As expected, the ECB´s staff revised down activity and up inflation projections, but Lagarde sounded relatively dovish on inflation
• The ECB has not incorporated yet any assumptions on either more US tariffs to Europe nor higher defense spending, but surely they will play a role in the discussions in upcoming meetings

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