UBS:
The market is focused on the ECB's decision to change the language in its statement to indicate monetary policy is "meaningfully less restrictive" versus saying it "remains restrictive" in the previous statement.
This is a statement of fact, it's not a hawkish signal.
In June 2024 the deposit rate was 4% and now it's 2.5%. It just is less restrictive than it was. Cross check that with CB commentary of late -- apart from Austria's Holzmann, you'd be hard pressed to find CB members guiding the market away from its current pricing of rates dropping to 2%.
Deutsche Bank:
The European Central Bank is treading a tightrope between trends that threaten growth and others that risk driving inflation higher. Subsequent policy will have to take into account the tariffs that President Trump has vowed to slap on European goods, and which could depress eurozone growth.
But ECB policymakers must also consider the planned step-up in defence spending in Europe. That investment could bolster growth and lead to a new spike in eurozone price inflation. This environment requires a deft hand on the monetary policy lever and the preservation of policy optionality.
BMO:
The ECB seems to be at a crossroads. It has done all it can do but given the huge amount of uncertainty ahead (President Lagarde used the word uncertain multiple times), we will need to keep monitoring events and data. For now, we are sticking with our expectation for a couple of more cuts.... next one in June. For now.
ING:
With the increased uncertainty and the prospects of large fiscal stimulus, the ECB’s direction of travel after today’s rate cut is no longer as clear as it was a few weeks ago. A pause at the next meeting to come to terms with the new macro reality now looks realistic. At the same time, if most of the fiscal stimulus is delivered, there will no longer be the need for the ECB to bring rates into slightly accommodative territory. Instead, we see the ECB pausing at the April meeting and cutting the deposit rate one more time to 2.25% in the summer, our new terminal rate. Of course, this is assuming there are no political setbacks in Germany. However, even if the need for further rate cuts fades, the ECB won’t be off the hook. Rising bond yields on the back of higher government debt could bring another theme to the eurozone soon: yield curve control.
Rabobank:
The ECB signalled that today’s rate cut will probably be one of the last in this cycle. We have postponed our forecast for the final rate cut from April to June, but the prospect for further cuts hinges on US trade policy and European defence spending. Growth forecasts were revised down, factoring in uncertainty about trade policy. However, the ECB did not specify how much of this uncertainty was factored into the inflation estimates. More importantly, the forecasts are already outdated – primarily owing to Europe’s initiatives to increase defence spending.
ABN AMRO:
Even if the US administration forges ahead with massive tariffs in early April, the uncertainty over negotiations, retaliation and impact will probably stay the ECB’s hand at this meeting. Instead, we think the next rate cut is likely to come when staff next update their projections at the June meeting. Looking further ahead, and despite the risks pulling in both directions, we think the balance is still tilted to the downside, and that the ECB will likely cut rates more significantly than markets expect.
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