The European Central Bank has delivered its 6th consecutive 25 bp, bringing down the main refinancing rate to 2.40%. The decision was expected by the markets currently betting on further monetary easing in the Euro Zone in the face of tariff growth threat. The post-decision press conference, during which ECB's president Christine Lagarde will provide the justification and the outlook for the Euro Zone's economy, has just started.
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Key insights from President Lagarde:
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The inflation is developing in line with ECB's expectations, but the growth outlook has deteriorated due to expected cosequences of tariffs.
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The scope of tariffs remains unclear, disrupting outlook for businesses and further elevating uncertainty, which might motivate consumers to hold back spending.
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The unemployment dropped in March to 6.1%, the lowest since the launch of euro, while real incomes keep climbing.
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European manufacturing has stabilised, with further improvement expected as a result of increased defence and infrastructure spending.
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Downside risk to growth has increased, with deterioration of financial markets' sentiment likely endangering investments globally.
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The euro has appreciated on the overall risk-off behaviour, further dampening inflationary pressures and poteniatly putting European exports at risks in a long term.
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Neutral rate is impossible to determine in the shock-driven environment.
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Lagarde underlines the efforts to boost competitiveness, establish investment and savings union and introduce the digitial euro as of paramount importance for Europe.
In conclusion, ECB is currently focused on the dowside risks to growth, but distances itself from the idea of cutting rates to stimulate Eurozone's economy. Inflation is decreasing as expected and could be put further down by consumers limiting their spending due to uncertainty and further euro appreciation.
EURUSD swung up and down slightly at the release of the monetary policy decision and during President Lagarde's conference, but it's now little changed around 1.136. Source: xStation5
