European Central Bank to cut 25bp today, and plenty more in the months ahead – preview

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.