“The ECB is done cutting rates,” said Sylvain Broyer, chief economist for Europe at S&P Global Ratings. “Sticky services and food inflation keep consumer sentiment under strain. Real wage growth still outpaces productivity, and easing the policy rates to weaken the euro would be useless in the present situation.”
The euro strengthened during the course of Lagarde’s press conference as the market pared back bets on any further policy easing. By 5 p.m. in Europe, it was at $1.1740, up 0.3 percent on the day. Interest rate futures now imply that most investors think the easing cycle is over.
A minority, however, is still holding out for one more cut in the first half of next year. Oxford Economics’ Angel Talavera noted via X that the guidance seemed strangely hawkish, given that the ECB is still predicting a dip in inflation to 1.7 percent next year — clearly, if not dramatically, below its 2 percent target.
And Deutsche Bank’s chief European economist Mark Wall noted that, in predicting core inflation still below target at 1.8 percent in 2027, the ECB had admitted that the dip in inflation could be longer than it thinks.
This article has been updated.