Lagarde Q&A - Some members preferred a pause

• We looked very closely to the data and projections. The ECB came to a conclusion to hike further, although there were some members that would have preferred to pause and wait on more data
• The solid majority agree that the hike was needed
• We did not discuss APP outright sales. We did not discuss PEPP Programme and Reinvesmtnets. PEPP is the first line of defense for transmission. (dovish)

No decisions about to pick up the pace of balance reduction should be considered dovish. 

• "I am not saying we are at peak rates." - the market is not moving on this statement

The market is pricing only a 10-15% probability of another hike from the ECB this year and starts pricing interest rate cuts in March 2024. Ahead of the press conference but after the decision, the market was pricing 30% probability of another hike.

• Recent hikes transmit on financial conditions faster than previous hiking cycles - this should be considered as dovish statement as it may indicate that further hikes are not necessary 

The market view on the ECB today is still dovish as EURUSD is heading below 1.0770 again. 

Source: xStation5