Split market decision pricing on 25 or 50bp in ECB Dec following the French and German PMI report. So much data still to come, and coupled with recent comments from ECB GC members, this will allow markets to speculate on a jumbo cut in Dec for now.

What a difference to just 1w ago

Markets reprice ECB expectations on the back of the current info on the US presidential election outcome. H2 25 pricing about 10bp lower, relative to yesterday.

Most important message from ECB in the decision statement: The hawkish bias of policy restrictiveness is removed. There is no cues about a potential jumbo cut or where they land (terminal rate), but importantly, the hawkish bias is removed btw, it was a 25bp rate cut

Lagarde is soft on the communication across the board today A dovish 25'er

2y EUR inflation just broke 2%, following the German inflation prints today.

ECB decision from a market perspective First glance: Nothing interesting Second glance: Nothing interesting Boring is good in this environment. ecb.europa.eu/press/pr/date/…

No change in ECB's risk assessment language on growth and inflation On route to another rate cut in March.

ECB terminal rate pricing Significant repricing in the past days on the terminal rate for ECB policy rate. Relative to Tuesday last week, markets have shaved off 1 full 25bp, to a terminal end rate of 1.84% (€STR+8bp) Trying the bluesky as well: pietphc.bsky.social

ECB's SPF from Friday showed yet another decline in the long term growth of EA. -0.02pp to 1.26%... The trend is not our friend

Disconnect between market pricing in inflation and €STR front end -Markets are split on ECB depo at 1.75 or 2% -Inflation markets pricing 2025 average at 1.94% and 1.69% in 2026 -Both markets can't be right at the same time, unless ECB is happy with those fixings,

Most important part of ECB's decision: "Monetary policy is becoming meaningfully less restrictive" Other things to note: - 25bp rate cut - lower growth and higher inflation in the ECB staff projections No guidance for April

No market reaction to the new wording. Well calibrated wording, or sufficient caveats to the compromise?

A fourth phase coming? Lagarde’s speech at the watchers’ conference last year mentioned three phases; the tightening, the holding and the dialling back phase. Let’s see what she has in store today #ecbwatchers

The reaction function laid out. Reminds of the odysséen approach from the pre-pandemic episode. Means increased data dependent for each upcoming monetary policy decision - and not a default option to cut or pause. The burden of proof is on the data. #ecbwatchers

ECB market pricing - 6bp lower (trough) since yesterday - since the March ECB meeting, we now have 1 full 25bp rate cut additional, as priced by markets.

Markets are pricing the €STR trough at 1.58%. That's 21bp less than on Wed.

Inflation vs. deposit rate, market pricing Markets are discounting a sharp drop in HICP inflation fixings, and a cut to (slightly below) 1.75% in the deposit rate. While it looks like a rebound to 2% inflation, it a brief rebound. 2y2y inflation swap is 1.72%.

ECB decision-slight dovish market reaction - 25bp cut -Focus on downside growth risks -Nothing on inflation upside -Removes the March guidance “is becoming meaningfully less restrictive” A solid guess for the presser would be no guidance and wait for the June proj Happy Easter

Quite a jump in ECB's SPF on long term growth prospects. German fiscal pacakge comes to mind as a possible explanation