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May 31 - 12:55 AM

ING: ECB Rate Cut Next Week a Done Deal

By eFXdata  —  May 30 - 04:30 PM

Synopsis:

ING forecasts that a rate cut by the European Central Bank (ECB) in the upcoming June meeting is almost certain, citing recent indications from ECB officials and current economic data. The focus now shifts to the nature and future implications of this expected rate reduction.

Key Points:

  1. Inevitable Rate Cut: Recent economic data, including inflation and sentiment indicators, are unlikely to deter the ECB from implementing a rate cut next week, fulfilling the widely anticipated move suggested by multiple ECB communications.
  2. Nature of the Cut: The upcoming decision is seen as a critical point to determine whether this cut is a singular adjustment or the beginning of a more extended easing cycle. The ECB’s approach will heavily depend on inflation trends and economic conditions aligning closer to the 2% target.
  3. ECB's Communication Strategy: Post-cut, the ECB is expected to adopt a cautious communication approach during the press conference, likely avoiding any definitive forward guidance to maintain flexibility in policy direction.

Conclusion:

While a rate cut by the ECB next week is deemed certain by ING, the broader implications and future monetary policy path remain open. The ECB is likely to frame the cut as a necessary adjustment while keeping its options open for responding to future economic developments.

Source:
ING Research/Market Commentary

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