Next ECB Meeting: What to Expect

Next ECB Meeting: What to Expect

Another ECB meeting coming up, and everyone is asking the same question: will they cut rates or not?

Current rates: ECB refi at 2.15%, 3-month Euribor at 2.163%. The market is pricing in roughly 0% chance of a cut at the next meeting.

Here is what I am watching:

1. Lagardes tone. The ECB president has been masterful at signaling without committing. Every word in the press conference is deliberate. If she sounds dovish (hint: uses words like "confident" about inflation), cuts are closer. If she stays hawkish ("vigilant," "monitoring carefully"), we wait longer.

2. The new economic projections. The ECB staff produces quarterly forecasts. If growth forecasts are cut and inflation forecasts stay low, that is ammunition for the doves on the council.

3. How the hawks vote. Bundesbank president Nagel and the Austrian governor Holzmann are usually the hawks. If even they soften their stance, a cut is almost guaranteed.

My prediction? Probably holding steady this meeting, but the statement will open the door for cuts later.