From Morningstar:

The European Central Bank is facing pressure to ease monetary policy, with expectations of key interest rate cuts this year. Inflation is falling, and recent data suggests the Eurozone is headed for a recession. While some council members are advocating for rate cuts, others push back against the expectation, stating that cuts are unlikely before summer.

Christine Lagarde tells Bloomberg that the ECB is likely to cut rates in the summer, despite prevailing market expectations. However, the Governing Council cautions that interest rate cuts are unlikely before June, as they await evidence of sustained inflation. With inflation falling and the risk of recession, policymakers are proceeding cautiously.

The ECB’s debate over rate cuts extends to coordination with other central banks, including the Federal Reserve and Bank of England. The Fed is facing a different economic scenario, with the US economy at risk of overheating. The ECB has more leeway to cut rates, unlike the Fed, which has a more complex task due to rising inflation in the US.

Financial markets are closely watching the ECB’s upcoming actions, with the bank indicating a data-dependent approach to future policy. The euro is expected to remain largely unchanged around the 1.09 levels. The latest economic data will also play a significant role in shaping future monetary policy.



Read more: ECB Rates Decision: What to Expect on Thursday