The next ECB rate decision is fast approaching but it’s essentially a done deal. Lagarde will cut rates on June 6 but afterwards the path is far less clear.
A bloc at the ECB wants to cut again in July and will push hard if data disappoints but the hawks want to wait for more data. That has the market priced for just 29 bps of easing at the July 18 meeting, or just a 16% chance of a cut. Some of that is conditional on the June cut so I’d put the real probability just above 20%.
Where it gets more interesting is the following meeting on Sept 12. That’s priced at 62% for a cut.
For the final meeting in December, the market is pricing in 60 bps in total cuts, or two full cuts with a 40% chance of a third.
Economic data will have a big say in how those numbers shift, including Wednesday’s German inflation report.
