Prior decisionDeposit facility rate 3.25% vs 3.25% expectedPrior 3.50%Main refinancing rate 3.40% vs 3.40% expectedPrior 3.65%Marginal lending facility 3.65%Prior 3.90%Incoming information shows that the disinflationary process is well on trackThe inflation outlook is also affected by recent downside surprises in indicators of economic activityInflation is expected to rise in the coming months, before declining to target in the course of next yearWill continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restrictionIt will be based on the assessment of the inflation outlook, incoming economic and financial dataNot pre-committing to a particular rate pathFull statement
Besides the rate cut itself, there are no changes to the policy communication by the ECB. So, this makes it a rather straightforward one. It is only in the first paragraph that they alluded to “recent downside surprises” in economic data. That would be their rationale for acting in back-to-back months.
Traders are still anticipating another rate cut in December with ~122 bps of rate cuts more until June next year. That would represent a 25 bps rate cut at each meeting until then.
EUR/USD is sitting flattish still, keeping around 1.0865 and not much changed from the decision announcement. It’s now over to Lagarde to bring it home.
This article was written by Justin Low at www.forexlive.com.
