The ECB is in no rush. In June, President Lagarde would not confirm that the rate cut signalled the start of the ‘dialling back restrictiveness’ phase of the rates cycle. As such, we expect the ECB to leave policy unchanged at the next Governing Council meeting on 17-18 July, Deutsche Bank macro analysts note.

ECB to leave policy unchanged in July

“The ECB is not on a pre-determined path. We expect the ECB to avoid explicit guidance again in July. The underlying direction of travel should nevertheless be clear. As inflation converges towards target, the restrictive monetary policy stance will unwind further. However, the ECB does not want to commit to when and how much it will cut. It wants to be led by the data.”

“Our baseline remains two more 25bp cuts in 2024, in September and December. A cut in September is not a done deal. Recent data suggest the ECB staff need to revise the near-term inflation outlook higher. However, a cut in September remains the most likely outcome. We continue to see the terminal rate in a landing zone of 2.00-2.50% in late-25/early-26.”

“We expect President Lagarde to be guarded in her responses to direct questions on France, saying that the ECB is attentive to what is happening in markets at all points in time and that euro area member states have agreed a fiscal framework with which they are expected to comply.”