PIMCO: ECB at lower cruising altitude

PIMCO: ECB at lower cruising altitude

7 juni 2024

Rente ECB
Rente (kalhh, Pixabay)

By Konstantin Veit, Portfolio Manager at PIMCO

  •  The European Central Bank (ECB) cut policy rates by 25 basis points, without providing firm guidance beyond June.
  • While the ECB has lowered its cruising altitude somewhat, the data flow over the coming months will decide the speed at which the ECB removes additional restrictiveness.
  • Given the ECB’s reaction function, we envision the ECB to keep cutting rates at staff projection meetings. September provides the next opportunity to holistically reassess the disinflation process.
  • Contrary to earlier this year, market pricing seems reasonable and broadly in line with our long-held baseline of three cuts for this year. We expect additional cuts in September and December.
  • Risks are skewed towards less cuts, mainly on the back of sticky services inflation, a resilient labour market, loose financial conditions and ECB risk management considerations.

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