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Jan 18 - 06:55 PM

Danske Bank: What We Expect From Next Week's ECB Meeting?

By eFXdata  —  Jan 18 - 04:00 PM

Synopsis:

Danske Bank provides insights into the upcoming European Central Bank (ECB) policy meeting, discussing potential outcomes and market expectations.

Key Insights:

  1. No Major New Signals Expected:

    • Danske Bank anticipates that the ECB meeting next week will not introduce significant new policy signals. This is due to the limited amount of new information available since the last meeting in December.
  2. Confirmation of Future Rate Cuts:

    • ECB President Christine Lagarde is expected to confirm that the next change in policy rates will likely be a reduction. This cut may occur in the summer, although it is unclear if the June meeting will be highlighted as a pivotal point for this decision.
  3. Key Criteria and Projections:

    • Lagarde is likely to reiterate the three main criteria for setting policy rates, pointing towards the importance of new staff projections in March.
  4. Market Pricing for Rate Cuts:

    • Current market expectations suggest the first ECB policy rate cut could happen in April, with a total of 135 basis points of cuts anticipated by the end of 2024. The policy rates are forecasted to reach a trough of 2% in two years.

Conclusion:

Danske Bank predicts a low-key ECB policy meeting next week, with no substantial new directions anticipated. While a rate cut is expected later in the year, likely around summer, the focus will be on the ECB's March projections to solidify any policy changes. Market pricing indicates a downward trajectory for ECB rates over the next two years.

Source:
Danske Research/Market Commentary

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