Reuters is reiterating and ECBs sources piece released on Bloomberg earlier. That is

  • ECB governors see a July cut as unlikely.
  • The ECB is focused on September as a potential rate cut meeting.

A summary of the press conference from ECB Pres. Lagarde:

In October 2022, inflation peaked at double digits, but by September 2023, it had reduced to 5.2%, and currently, it stands at 2.6%. President Lagarde emphasized the need for more data to confirm the disinflationary path, noting that while restrictive measures were more pronounced in September, various factors such as base effects and wage trends could introduce uncertainties. Wages, particularly in the services sector, play a significant role in inflation. Although wages remain elevated, there are signs of a recent decline, and the ECB must consider wage divergences across countries and the impact on services prices.

The ECB's policy decisions and data releases are not perfectly synchronized, making it difficult to predict future actions. Lagarde stated that market pricing of rate cuts is independent of ECB decisions, which have resulted in a reduction of anticipated rate cuts from 64 bps to 36 bps for the remainder of the year, totaling ~61 bps. Despite various challenges, including unanticipated bumps in the disinflationary process, the ECB is committed to bringing inflation back to the 2% target in the medium term. The decision to moderate the restrictive stance was almost unanimous, except for one governor. The ECB will continue to take a serious approach to combating inflation, staying restrictive until the 2% target is achieved. Lagarde affirmed that the ECB is far from reaching the neutral rate, which remains a key objective.

PS It is now being reported by Reuters that ECB Holzmann was the lone dissenter. Holzmann is considered more of a hawk and his dissent solidifies that distinction.