The ECB concluded its technique evaluation yesterday. The overview doesn’t recommend main modifications within the conduct of financial coverage, nor within the communication of its coverage choices, Rabobank’s Senior Macro Strategist Bas van Geffen reviews.
Decrease odds of price cuts regardless of 2026 inflation undershoot
“The ECB confirmed its 2% inflation goal. Policymakers will reply forcefully to massive, sustained deviations from the goal. Nevertheless, the overview arguably additionally permits for a bit of extra tolerance for smaller divergences. Arguably, this lowers the chances that the ECB will reply to the anticipated inflation undershoot in 2026.”
“Coverage charges stay the principle instrument, however the overview means that the ECB won’t exhaust this instrument earlier than policymakers contemplate options. If additional easing is required, e.g., in response to an escalation of the commerce conflict, this might result in a coverage combine the place rates of interest will not be slashed to zero, however the ECB restarts QE as a substitute.”
