ECB REVIEW: See you in June

As expected the ECB opted to stand pat on rates as policymakers continue to monitor progress towards the Bank's inflation mandate. Furthermore, guidance on rates was reaffirmed as stating that "rates will be set at sufficiently restrictive levels for as long as necessary". This served as a disappointment to some who had been hoping that policymakers would insert some language suggesting that discussions on the policy normalisation process had begun. However, the accompanying macro projections did offer something to the doves with the 2024 and 2025 inflation forecasts lowered, leaving the latter matching the Bank's 2% target. From a growth perspective, 2024 was cut to 0.6% from 0.8% with next year's forecast held at 1.5%. At the follow-up press conference, Lagarde noted that, whilst inflation is continuing to move lower, it remains elevated due to wage pressures and therefore the Bank is not yet "sufficiently confident" when it comes to meeting its target. In terms of the policy path beyond the March meeting, Lagarde stated the Bank will know a little more in April but a lot more in June. When it comes to the discussions held today, Lagarde stated that today's policy decision was unanimous, there was not a discussion over rate cuts but the GC has begun discussing dialling back its restrictive stance with the view that the Bank will not wait until the 2% inflation target is reached in order to cut rates. In terms of the lie of the land after the meeting, market pricing is little changed with a June cut still near-enough fully priced in with a total of 93bps of easing seen by year-end. 

07 Mar 2024 - 15:07- Fixed IncomeResearch Sheet- Source: Newsquawk