MNI ECB Review: Little Conviction To Shift 2% Terminal Pricing

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Executive Summary

• The ECB left its three key rates unchanged again, including the deposit rate at 2.00%, as fully expected.
• The decision statement offered no surprises, reiterating data-dependence and a meeting-by-meeting approach.
• Instead, the hawkish initial reaction was driven by firmer economic projections, especially core HICP for 2026 and real GDP growth for 2027 and 2028.
• That hawkish reaction was pared by a balance and non-committal press conference from Lagarde.
• Traditional post-meeting ECB sources pieces noted any hike discussion is premature (Bloomberg) along with a more dovish angle that policymakers aren’t ready to take a cut off the table (Reuters).
• Highlighting the lack of discussion at this meeting, Reuters sources say it ended exceptionally early just after 0900GMT, especially of note for a projections meeting.
• There appears to be little appetite to move markets away from the current 22% terminal pricing. Capturing rate markets shortly after the press conference had ended, there were a cumulative 2bp of cuts priced to Jun 2026 and 2.5bp of hikes to Dec 2026.

Stronger forecasts but little conviction in the following press conference: