ECB - European Central Bank

ECB - European Central Bank

March 1st 2024


ECB Announcement (Thu):

Expectations are for the ECB to once again stand pat on rates with markets assigning a 94% chance of such an outcome. The previous meeting passed with little in the way of fanfare with the Governing Council very much in wait-and-see mode as policymakers track progress in inflation returning towards the 2% mandate. In terms of developments since the prior meeting, headline HICP pulled back to 2.6% in February from 2.8%, whilst the core metric fell to 3.3% from 3.6%. From a growth perspective, Q4 GDP printed at 0% vs. the 0.1% contraction seen in the prior month, whilst more timely PMI data saw the EZ-wide services PMI rise to 50.0 from 48.4, manufacturing slip to 46.1 from 46.6, leaving the composite at 48.9 vs. prev. 47.9. The accompanying report noted "The latest PMI print gives hope for a recovery in the eurozone". Recent comments from ECB officials continue to point towards no imminent intention to lower rates with President Lagarde observing that the ECB is "not there yet" when it comes to inflation, whilst most officials wish to see the outcome of the April wage data (released after the April meeting). In terms of a timeline for the first cut, known-dove Stournaras of Greece does not anticipate one until June with markets broadly in-fitting with this viewpoint, assigning a 92% chance of such an outcome. In the analyst community, 46/73 surveyed by Reuters expect a reduction in June, 17 look for April and 10 expect a H2 reduction. With regards to the full year outlook, markets anticipate a total of 86bps of policy loosening, the median view of analysts looks for 100bps. For the accompanying macro projections, analysts at Danske Bank expect (for the first time in the hiking cycle) "staff projections to show that inflation will hit the 2% target in both 2025 and 2026", with the 2024 HICP projection to be cut to 2.4% from 2.7% on account of "recent lower than expected inflation data, anchored inflation expectations, and lower energy futures".