**As seen in Risk In The Week report 04/05/24, subscribe at cablefxm.co.uk/reports
The ECB left rates unchanged in March, the main refi rate sits at 4.5% and the deposit facility at 4.0%, in line with economists' expectations. We received a batch of updated macroeconomic projections, the main highlight was inflation seen reaching the 2% target in 2025, and staff sees prices at 2.3% this year. On the growth front, the central bank expects output to rebound next year to 1.5% from the 0.6% rate in 2024. While Lagarde stuck to her previous call of a rate cut during the summer, we have seen board members penciling in a variety of views, ECB's Stournaras said the central bank would have to cut rates twice before the Summer break. March flash CPI saw prices falling to 2.4%, the lowest level since November, we will get the final release on April 17. Activity has been mixed, March services sector expanded further while the manufacturing survey declined more than expected.
Analysts at MUFG said they will be looking for signs of a rate cut discussion, something Lagarde refused to construct in March, they think that a June move could be set by the ECB if there is mention of such discussion. MUFG warned that an extended upside in crude oil prices could keep the ECB in a cautious setting and push the first rate cut beyond June. Negative contributions from energy prices have been prevalent since August, however, recent data points have shown energy disinflationary pressures easing. Strategists at Natixis said that there will be no forward guidance on how continuous will ECB easing be from June and that the central bank will rather stress on data-dependency for its future decisions. The French bank expects the ECB to deliver a total of 125bps of rate cuts this year. Lastly Natixis warned that we could hear the central bank sticking to a wait-and- see tone as services inflation remains sticky, and the ECB will likely mention the need for further evidence of wage easing.
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