- ECB forecast very similar to where it was in June
- Risk still remains elevated
- Meeting-by-meeting approach is still right
- We are in good place on inflation
- Lagarde was clear that we don't see France stress
- December meeting is rich, projections will show if there is deviation from 2% target and how persistent and large it may be
- If ETS 2 carbon-pricing system doesn't happen, that would have quite a sizeable downside impact on inflation
- Exchange rate and Chinese trade flows are key risks
- We should stick to a meeting by meeting approach and remain data dependent
Expect more comments from ECB members today as it's usually the case after the rate decision day. The rate cut cycle has ended for the ECB and they will need significant reasons to cut further. The market is pricing just 4 bps of easing by year-end and 14 bps by the end of 2026.
