IMF senior economist Decresson says the ECB should cut if the economy does not get better.
The market has beat him to the punch, fully pricing in a 25 bp cut at the October meeting with an outside chance seen for a 50 bp cut.
I’ve long held that the ECB would cut before Trichet ends his term because the optics of an Italian ECB chief cutting rates early in his tenure, reversing tightening cycle, is not one the ECB would look really, really bad. It would feed every stereo type of the “Club Med” central banker taking the helm, rather than a Germanic inflatio-phobe.
EUR/USD is slumping after the stop-rum above 1.3730 on the SNB talk.
NOTE TO MARKET: DON’T BUY EUR/USD ON SNB EUR/CHF ACTION/RUMORS. The last two EUR/USD spikes on SNB peg talk have quickly faded.
