- We are going with at least two rate cuts this year, barring any bad news
- We still want policy to remain a little restrictive
- Cutting rates again in July could be interpreted to mean we are going to cut at every meeting
- And that would lead to repricing that might go too far
- July decision should be about managing expectations
- I'm very comfortable with rate cut in June
- But if we only do two or three rate cuts, then should not communicate that at every meeting
- Would be very surprised if ECB does more than 25 bps rate cut in June
This fits with the ongoing narrative and market pricing for the most part at least. A move is June is set in stone unless there is a major surprise. As for what comes next, the ECB is trying to allude to data dependency. So, we'll see.
