MNI ECB Preview: Growth Outlook Watched Amidst Data Dependence

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Executive Summary

• The ECB is fully expected to leave its three key rates on hold on Thursday, with its deposit rate at 2.00%.
• ECB President Lagarde is expected to continue to suggest policy is in a good place.
• A data-dependent and meeting-by-meeting approach is expected to be reiterated in a continuation of July’s “deliberatively uninformative” communication approach around future rate decisions.
• Lagarde’s characterisation of economic resilience and/or the extent to which uncertainty has been alleviated by the US-EU trade deal should help shape market reaction.
• Fresh economic projections aren’t expected to be material. 
• Recent resilience sees cuts no longer fully priced, with a cumulative 18bp of cuts seen out to mid-2026.
• We judge that the median analyst no longer looks for another cut although the bias is clearly still lower, with 7 of 25 looking for one more cut and 4 looking for two more.
• EUR/USD approaches the meeting after recent strength has seen it tilt back closer to 1.18, a level shortly after which drew unusually direct comments from ECB’s De Guindos back at the Sintra conference.