Next week, on Thursday 7 March, the ECB is set to take another step in its policy normalisation process, from a restrictive monetary policy stance towards a neutral stance. The new staff projections on growth outlook are expected to be revised lower this year and broadly unchanged in 2025/2026. Inflation is set to be revised to 2% for 2025. While neither the revisions to staff projections nor Lagarde will close the door to a rate cut at a specific meeting, we continue to expect that the key meeting for the first rate cut will be the meeting in June. We do not believe that the incoming data since the January meeting has been sufficiently weak to make April the baseline meeting (see appendix on European data at the end of this report).
Markets significantly repriced policy easing expectations in February from around 150bp worth of rate cuts to 87bp. We continue to expect the first rate cut in June of 25bp and 75bp worth in total for this year.
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