It is not too uncommon to see the ECB not hog the spotlight during policy decision weeks. But when it is accompanied by a change in rates, that is a bit uncommon. This week though will be one of those weeks, as the ECB has already well telegraphed a 25 bps rate cut for this month.
So, the question now is what will come next?
For now, arguably more of the same. They can't pre-commit to another move just yet and they cannot outright declare victory against inflation just yet.
The good news perhaps is that the economy is not slowing at a recession-like pace, forcing them to go faster in the cycle. It seems like things are just about right for the ECB at the moment.
Some policymakers have come out to say that one rate cut every quarter seems to be ideal currently. And I don't think Lagarde will want to fight that this week. She may not be explicit about it but she surely won't rule it out either. That considering the recent progress in economic developments.
As such, there won't be much to scrutinise from the ECB policy decision this week. That unless we do get a surprise in terms of language from Lagarde. But by now, she should not make such a rookie mistake.
Market players are pricing in ~63 bps of rate cuts for the remaining three meetings this year. That just means it's a toss up between two 25 bps rate cuts or three. And that will depend on the data in the weeks and month ahead, more so than the ECB decision.
