ABN AMRO analysts on the European Central Bank meeting today, are with the broad consensus expecting a 25bp rate cut.
But express caution on the path after that, citing the recent data, for example, firm services inflation still prevalent:
- the probability of a July follow up rate cut has fallen further
-
ECB will maintain a clear easing bias, einforced by the updated staff macroeconomic projections
- the Governing Council will signal that the timing and extent of rate cuts will be data dependent
- ECB’s forecasts will be little changed from those in March
- projections should show inflation modestly undershooting the ECB’s inflation target over the medium term
Concluding:
- “We see considerable room for interest rates to come down over the next year”, and add that markets are underestimaitng the extent of rate cuts to come
- should see a weaker EUR
This article was written by Eamonn Sheridan at www.forexlive.com.
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