ECB Minutes: Eurozone disinflation is well on track, risk appetite rebounds 🔍

EURUSD ticks slightly higher following the relase of the minutes from the last ECB policy meeting. The report reiterates previous statements on inflation staying well on track toward the 2-percent target. Current pressure comes mainly from energy prices, while the wage growth effect starts moderating. The minutes also reaffirm recent statements from the Governing Council members advocating for more cautious policy adjustments, as the rates have been already significantly lowered.

Source: xStation5

Key statements can be found below:

Financial Market Developments

• Euro area risk appetite rebounded, pushing equity and corporate bond prices higher.

• Long-term interest rates rose due to expectations of a tighter ECB policy and improving euro area economic outlook.

• Inflation expectations for 2025 increased, driven by higher energy prices.

• Market pricing now suggests a more gradual rate-cutting cycle, with smaller reductions expected in 2025.

Economic and Inflation Outlook

• Headline inflation increased to 2.4% in December, mainly due to energy prices.

• Underlying inflation indicators suggest inflation is stabilizing around 2%.

• Wage growth is moderating, reducing domestic inflation pressures over time.

Policy Outlook

• ECB considered a 25 basis point rate cut to support economic activity while ensuring inflation stabilizes at 2%.

• Maintaining rates unchanged would risk dampening demand too much.

• ECB remains flexible, adjusting policy based on inflation and economic data.

• Easing could proceed more slowly if inflation pressures rise or the economy strengthens.

• Conversely, policy easing may accelerate if economic conditions worsen.