Not much is expected from the data-dependent ECB at the July meeting. Another rate cut looks very unlikely, and the magnitude of data before the September meeting makes giving firm signals about the September meeting somewhat controversial, Nordea’s Chief Analyst Jan von Gerich notes.

A cut in September is highly likely

“When the ECB cut rates at the June meeting, the signals about future steps were almost totally absent. Only a few members have taken a stronger stance on the schedule of further moves. However, the vast majority of Governing Council members have been vaguer in their comments, in line with the data-dependent and meeting-by-meeting approach.”

“Given the absence of signals that the recent data have been largely in line with expectations and the ECB’s seeming willingness to remove restrictiveness only gradually, another cut at the July meeting would be a major surprise, and it would also be a surprise, if the ECB gave any firmer guidance at the July meeting.”

“Financial markets are currently pricing in around 20bp worth of cuts for the September meeting, pointing to a baseline where the next cut will take place at that meeting. Virtually nothing is being priced in for the July meeting. Our baseline remains a cut in September. While we do not expect any major market moves following the July meeting, dovish comments could push also EUR rate expectations lower.”