Summary

• ‍Let’s do the nuts and bolts of the June ECB meeting first before discussing the press conference, which was a bit of a mess (is Lagarde even in charge?);
• As per the ECB’s own guidance, market and analyst expectations, the ECB cut all three rates by 25bps (deposit rate to3.75 percent; main refinancing rate to 4.25 percent; marginal lending rate to4.50 percent). Effective per the next maintenance period starting on June12. No other monetary policy/technical changes;‍
• Rate cut was unanimous except for one dissenter, which was highly likely Austrian central bank governor and arch-hawk Holzmann (Holzmann later confirmed he dissented);
• No clear signal if today’s cut is a ‘one-and-done’, or if the ECB will cut at regular intervals in the second half of the year or early 2025. Policy will have to remain restrictive regardless;‍
• ECB staff forecasts for headline inflation, core inflation and GDP were all increased. Most important changes were real GDP for 2024 to 0.9 percent from 0.6 percent; core inflation for 2024 to 2.8percent from 2.6 percent; core inflation for 2025 to 2.2 percent from 2.1percent; headline inflation for 2024 to 2.5 percent from 2.3 percent. Full forecasts here;‍
• Upgrade of the economic assessment. From risks are tilted to the downside to balanced risks in the near-term but titled to the downside in the medium term. More downbeat on inflation, which is now likely to stay elevated well into next year;‍
• With the mundane stuff out of the way, let’s discuss today’s meeting. In particular, the press conference.