Bankinter: ECB minutes of the meeting of 12 September. The focus in the markets has shifted towards economic growth to the detriment of inflation, which has moderated in recent months. Fears of a slowdown in the US economy have raised expectations that the Fed will cut rates more aggressively than the ECB.
This approach has carried over to Europe in the face of a somewhat weaker macro picture than in previous months (growth forecasts have been cut) and suggests that the economic recovery is weak. The ECB does not expect Europe to enter recession, despite the differences between eurozone countries.
CPI has slowed supported by energy prices. They expect CPI to accelerate in Q4, for inflation to stabilise at the 2% target in 2H 2025 and for wage moderation to contribute to this objective. The described environment allows them to moderate the monetary policy bias and they consider it appropriate to cut rates by 25bp, although they maintain the restrictive bias and will do so for as long as necessary until there is evidence that the inflation target has been reached. The depth and pace of the next cuts will depend on macro data and will be decided on a timely basis at each meeting.
Opinion of Bankinter’s analysis team: Nothing changes, the ECB highlights the weakness of the economy and justifies the rate cut due to the slowdown in CPI, even though the Underlying Rate remains high, and given the need to boost investment. It maintains the approach of deciding on the basis of the data available at each meeting and gives no indication of when it will cut rates again. Although our central scenario points to a further rate cut in December, the chances of a further rate cut in October have recently increased.
