The ECB's Advanced Steps Be Attention! This is the view of the drafters should consider the market


The next move expected by markets by the European Central Bank (ECB) is an interest rate cut, but the latest developments dampened expectations somewhat with policymakers speaking on Monday refusing to say when such a move or trigger would be taken.

The ECB kept interest rates at a record high of 4% last Thursday and stated that inflation was under control, reinforcing already widespread speculation in the market that policy easing could start as early as spring.

The policymakers agreed that the inflation trend looked promising but some of them drew different conclusions, arguing for early action while others argued for the market to be patient until the policymakers get further confirmation that inflation is under control.

In summary, although some of the views of the drafters seem quite different, they basically carry the same meaning. However market analysts found almost no one expected a rate cut in March, so the real debate is whether the ECB should cut rates in April or wait until the next meeting in June.

Investors now see as much as 140 basis points of interest rate cuts this year and see a near 100% chance of one in April. On the conservative side, the ECB's Kazimir argued that cutting rates too early is a greater risk because acting too early could thwart deflation and actually extend the period of tight monetary policy. Klaas Knot, the influential head of the Dutch central bank, also appeared to support a wait-and-see approach, arguing that some elements of the inflation puzzle are not yet in place.

Meanwhile, Centeno said there is already a lot of evidence that inflation is declining continuously and waiting for the first quarter wage data that will come out in May."Data-dependent does not mean wage-dependent... we don't have to wait for the May wage data to get an idea of the trajectory inflation," he said.