The economists of TD Securities analyze the European Central Bank's (ECB) interest rate decision and its implications for the EUR/USD pair.
Base case (65%)
The ECB leaves rates unchanged in its press release. The forecasts remain practically unchanged, although with small downward revisions to inflation in 2024. Lagarde points out that the evolution of inflation is promising and that, although wage growth is persistent, there are signs that it is declining. Lagarde remains vague about the timing of the first cut, which would be consistent with cuts in the second quarter. EUR/USD +0.15%.
Hardline statement (20%)
President Lagarde notes that inflation is falling, but points to strong February data as a warning against complacency. In addition, Lagarde continues to insist on the importance of wages and suggests that the first quarter wage data, published after the April meeting, will be key to determining when it is reasonable to start easing monetary policy. Although Lagarde does not explicitly speak out against a cut in April, she says that cuts are quite far away. EUR/USD +0.70%.
Moderate (15%)
The ECB maintains monetary policy and does not introduce major changes in its press release. Forecasts are revised downwards, particularly for inflation in 2024, but also for inflation in 2025, and headline inflation is now expected to be below target in 2025 and 2026. Lagarde says that although wage growth is a key point, it is already showing the first signs of cooling, and is a lagging indicator, and the Inflation remains the ECB's only objective. Although Lagarde does not want to specify when the first cut is on the table, he makes it clear that the April meeting will definitely be a live meeting. EUR/USD -0.60%.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
