ECB Meeting Today: Expected Interest Rate Cut. Market Predictions and Live Updates

ECB Meeting: Crucial Decisions and Expectations

The ECB meeting scheduled for today, Thursday, June 6, is expected to be crucial.
The first interest rate cut is considered certain.
If confirmed, it would represent a turning point after the surge in the cost of money since the summer of 2022.
The European Central Bank seems destined to lower rates to 4.50%, as it has not done since 2019, preceding other major banks such as the Bank of England and the Fed.
However, what will happen next is the biggest puzzle for investors.

Despite expressing confidence in the declining inflation rates in the Eurozone, several Eurotower officials have tempered market enthusiasm about the cuts.
The sentiment remains cautious, and some members of the Governing Council have already announced that the decrease in the cost of money will not be repeated in July.

Inflation has approached the bank’s 2% target but increased more than expected in May and remains sticky in the services sector.
Meanwhile, the Eurozone economy is recovering faster than expected, and the labor market remains tight, casting uncertainty on how many times the central bank will cut rates this year.

In this context of cautious optimism, the ECB meeting on Thursday, June 6, has sparked various speculations on what Lagarde will announce in the press conference.
The likely decision of a rate cut will also be accompanied by an update of economic projections, raising expectations for the meeting.

Market Expectations and Outlook

Many ECB officials have almost promised a rate cut in June and most likely will not deny the possibility of initial monetary policy easing.
The expectation is a 25 basis points cut, bringing the ECB deposit rate to 3.75% from the record of 4% reached last September.

The certainty about the decrease in the cost of money started to waver after the latest Eurozone inflation recovery data released last Friday.
Analysts, however, do not anticipate any surprises even though this indication is not positive and comes just before the meeting.

In summary, for the majority of experts, it will be challenging for ECB policymakers not to cut rates, especially after many of them have clearly signaled moving towards becoming the first major central bank to start reducing financing costs.
Jens Eisenschmidt, Chief European Economist at Morgan Stanley, stated, “The cut itself won’t be a big surprise.
The real question will be: what is the message about what comes next?”

The real risk is that this week’s move might seem premature if Eurozone inflation continues to deviate from its 2% target, while the Federal Reserve and the Bank of England wait much longer before cutting rates.

Moreover, the ECB’s June decision is also influenced by a possible divergence from the Federal Reserve.
The ECB has repeatedly stated its independence from the US central bank, but economists are debating to what extent monetary policies can truly diverge.

Economic Projections and Future Moves

It is expected that the bank will slightly revise upwards its growth and inflation projections, but this should not derail its expectations that inflation will return to the target level by the end of 2025.

Investors’ attention will be focused particularly on any changes in consumer price trends, especially for the current year.
According to ING’s analysis, core inflation seems poised to slow down again, but the question remains: at what pace?

As the ECB meeting unfolds today, the financial markets eagerly await Lagarde’s statements and the new macroeconomic forecasts from the ECB staff, seeking signals on the pace of rate cuts after June, and in particular, a possible second cut at the July meeting.
On this last point, UBS is skeptical.

Greg Fuzesi, an economist at JPMorgan, described the likely 0.25 percentage point cut in the ECB deposit rate of 4% as “a bit rushed and odd,” adding that “the cost of waiting until September appears low while the benefit of gaining more clarity on inflation prospects appears high.”

In conclusion, the ECB’s decision at today’s meeting and Lagarde’s statements are closely watched, as they carry significant implications for the Eurozone economy and monetary policy outlook.