TechFlow news, on January 30, according to Jinshi News, Danske Bank said the European Central Bank's policy decision is essentially pre-guided for another 25-basis-point rate cut, bringing the policy rate to 2.75%. This aligns with the consensus expectation of analysts and the market.
Given the prevailing uncertainty surrounding the Trump administration and the ongoing resilience of the domestic economy, no new signals regarding the outlook for the ECB's policy rates are expected.
Therefore, the third-tier reaction function (inflation outlook, underlying inflation, and strength of monetary policy transmission) is expected to dominate, and the ECB is likely to reiterate its data-dependent approach.
In addition, markets expect the ECB to cut rates by nearly another 100 basis points this year. While we anticipate a more aggressive easing cycle from the ECB, if Lagarde does not commit to the terminal point of the rate-cutting cycle, markets may again exhibit the hawkish reaction seen in December.
