ECB's Second Rate Cut Hits Markets, Confirming Expectations

ECB’s Second Rate Cut: A Quick, Easy‑Peasy Update

Short news flash: The European Central Bank just dropped its interest rate for the second time this cycle—a move already wrapped up in today’s markets, thanks to the Council’s crystal‑clear hints.

What Happened?

Deposit rate now at 3.50 % – the lowest figure since last July.
Cut of 25 basis points – a modest slide to ease borrowing costs.
Policy guidance stayed pretty stable – nothing surprising for traders.

Key Takeaways for Market Fans

ECB’s tone in the minutes left no doubt that decisions will stay data‑dependent and meeting‑by‑meeting. They’ll applaud inflation trends—particularly the core price moves—before moving the dial again.

Price Forecasts: Moderately Tame but Unchanged

Most new projections were a bit milder:

GDP growth expectations trimmed across the board—thanks to lingering upside risks and the earlier 0.9 % 2024 fudge factor.
Inflation outlook? Same gobbledygook as before.

What Does This Mean for the Eurozone Economy?

For now, this rate shift is a routine footnote. The real headline is President Lagarde’s press conference, which could sneak in a few more clues.

Meanwhile, the EUR OIS curve still feels a tad over‑priced. Analysts predict an additional 37 bps of easing by year‑end. The plan? Likely a single more rate cut in December.

Currency Rallying—Why the EUR/USD Might Rise?

If the U.S. Federal Reserve adopts a more dovish stance next Wednesday, the split could boost the euro against the dollar over the mid‑term.

Looking Beyond the Year

Come December, expect some diversity of opinion in the Governing Council. The debate will center on how far loose policy can stretch before it risks inflation revivals and too‑aggressive support for an economy that still feels the pinch.