The European Central Bank (ECB) has lowered interest rates for the sixth time to 2.50%, citing progress in disinflation and moderated wage growth. This move reflects ongoing debates within the ECB regarding the economic impact of interest rates, with some members advocating for a less restrictive stance. The hawkish sentiment among policymakers appears to be growing, leading to uncertainty in future rate adjustments. While a subsequent cut is likely by April amid anticipated economic spending, demand continues to show weakness, leaving uncertainties in US trade policies as potential headwinds.
The ECB cut rates for the sixth time to 2.50%, indicating a well-progressing disinflation process and moderated wage growth, while warning of less economic constraint.
The slightly hawkish stance from the ECB has given Bund yields a boost and lifted the EUR/USD above 1.08 as 2025 expectations diminish.
Policymakers avoided dropping the 'restrictive' label, indicating rates are 'becoming meaningfully less restrictive', reflecting a fractured consensus within the ECB.
Despite the end of automatic cuts, another rate move is anticipated by April due to upcoming economic spending plans, but current demand remains weak.
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