ECB's Knot: Markets are getting ahead of themselves on rate cuts

<ul><li>A lot must go well for inflation to hit 2% in 2025</li><li>We need to see a turnaround in wages</li><li>Policy easing, if and when it happens, will be very gradual</li><li>Rate path priced by markets can be self-defeating</li><li>The more easing markets are doing, the less likely we'll cut</li></ul><p>The messaging is all over the place if you throw in Lagarde's comment about cutting rates by the summer <a href="https://www.forexlive.com/centralbank/ecbs-lagarde-it-is-likely-that-we-will-cut-rates-by-the-summer-20240117/" target="_blank" rel="follow">here</a>. If this isn't textbook ECB, I don't know what is. But at this point, I reckon markets will be more than convinced that April is on track to be the first stop for the central bank to begin the easing process.</p>

This article was written by Justin Low at www.forexlive.com.