Members of the Governing Council have left little to surprise for June – even the hawks have been indicating a cut is most likely coming. The debate has moved onto July and we don’t think Lagarde will publicly take sides so early.
The European Central Bank will almost certainly lower interest rates by 25 basis points at its next meeting on June 6. The focus at the press conference is likely to be on what will happen in the months ahead. President Christine Lagarde is unlikely to explicitly signal another move in July, but she may give a gentle nod to more action in September.
Bloomberg Economics forecasts a cut of 25 bps in June, and, after a pause in July, more reductions of the same size in September, October and December. Financial markets have fully priced in a reduction in June and one more before the end of the year.
