Let’s dive straight into the calls (h/t @ MNI Markets).
Deutsche Bank
– 25 bps rate cut
– “Even with the US tariff pause, the arguments now clearly favour a cut”
– “The hit to growth from reciprocal tariffs, uncertainty and financial conditions likely exceeds what the ECB
was expecting”
– “We expect the “meaningfully less restrictive” language to remain in April despite another rate cut. In
combination with the view that inflation is returning to target, this has an implicit dovish leaning”
– ECB will keep the data-dependent, meeting-by-meeting approach to
determining the “appropriate stance”
– “We think the risks of disinflation are being underestimated, and we hold our 1.5% terminal rate view”
Societe Generale
– 25 bps rate cut but not ruling out a 50 bps move “to more clearly exit the restrictive stance”
– “The downside risk to growth and inflation should dominate any worries over one-off increases
in the price level”
– “The message after the April
meeting will be much more focused on the disinflationary forces, stemming from weaker global and US
growth, lower energy prices, a stronger EURUSD, and a higher risk of China redirecting excess capacity
into Europe”
– “While we would argue that neutral is likely somewhat higher than the ECB’s 1.75-2.25% in normal
conditions, we think there is margin for the ECB to err on the downside under the current conditions”
UBS
– 25 bps rate cut
– “We do not think the ECB will cut rates by 50 bps, given the current uncertainty over the degree
of EU retaliation (which would likely be inflationary), the duration of US tariffs at current levels (i.e. the
success of future negotiations) and – more broadly – the broader impact on Eurozone growth and inflation”
– “We expect the ECB to follow up with another 25 bps rate cut to 2.0% in June”
– “Another 25bp rate cut to 1.75% in July is not our base case scenario right now”
– “That said, we think the hurdle towards a July cut to 1.75% is not very high, particularly if US tariffs appear
more permanent and the EU retaliates only to a limited extent, generating little additional inflation pressure;
a strong EUR and higher bond yields would also prove disinflationary and help the ECB to cut”
Goldman Sachs
– 25 bps rate cut
– “ECB to acknowledge the growing downside risks to growth and note that the
trade tensions raise the uncertainty around the inflation outlook”
– “We expect the ECB to
remove the “meaningfully less restrictive” phrase but keep the remaining policy language unchanged”
– “During the press conference, we look for President Lagarde to signal more concern around growth due to
the trade tensions but remain non-committal on future policy steps”
– A 25 bps rate cut in June is “highly probable” before another expected rate cut in July
– “Our updated ECB scenario analysis includes a downside scenario where the policy rate falls to 0.75% (for
example, if the euro area enters a deeper downturn) and an upside scenario where the policy rate remains
at 2% (for example, if the US administration reverts to narrower tariffs)”
– Sees a 50% probability of
baseline, 30% upside and 20% downside in the scenario analysis
Commerzbank
– 25 bps rate cut
– ECB will probably describe its
current monetary policy as “neutral”
– “We now expect interest rates to be cut
not only in June but also in September” due to US tariffs
– “ECB is likely to be cautious in its communication and leave all doors open”, no kind of forward guidance is expected
– “We
assume that monetary policy will no longer be described as “becoming meaningfully less restrictive”, rather it is likely to have reached the “neutral range” according to policymakers”
This is a very neat summary of the consensus view going into the meeting later:
