MNI ECB Review: Some Disinflationary Angles Downplayed

Download Full Report Here

Executive Summary

• The ECB again left its three key rates unchanged as fully expected, with the deposit rate at 2.0% in the middle of its estimated neutral range.
• The decision statement offered no surprises: the economy is resilient in a challenging global environment whilst it repeated a data-dependent and meeting-by-meeting stance.
• President Lagarde reaffirmed that the ECB is in a “good place”, while noting that “we are in a broadly balanced situation when it comes to the risk assessment”.
• There wasn't any material endorsement of dovish narratives related to geopolitical uncertainty and the exchange rate, helping Euribor futures pull away from post-decision highs but moves were contained.
• She also downplayed the soft January HICP flash release and made comments that could be interpreted as a subtle critique of Eurosystem forecasts.
• Lagarde hinted at an announcement in the coming days on repo lines for other national central banks outside the euro area and outside Europe.
• There was little net change in the OIS-dated rate path for 2026 across the broad suite of communications, with 6bp of cuts priced to September, but that was despite US rates rallying on a series of weak labour data releases and broader risk-off around the decision.
• There are still many analysts who expect rates to remain at 2% throughout both 2026 and 2027. Of those expecting hikes, the majority eye the mid to the second half of 2027 whilst only BofA and Morgan Stanley expect cuts.