Making Sense

  ECB monetary policy announcement - The implied rates for 2024 see a full 25 bps rate cut priced by June Policy and 97 bps of rate cut into 2024.  Key interest rates were maintained unchanged as of the end of February 2024, amidst a backdrop of declining inflation rates, subdued economic growth, and low unemployment. Inflation edged down to 2.6% by February 2024, following a decline from 2.8% in January. Despite downward revisions in inflation projections, mainly attributed to decreases in energy prices, domestic price pressures remain elevated, fueled by robust wage growth. Economic activity remains weak as of the end of 2023, with consumers holding back on spending and moderated investment. GDP growth was projected to be 0.6% for 2024, indicating a sluggish recovery. Unemployment stands at its lowest since the euro's inception, as of the end of 2023, but output per person has continued to decline, indicating challenges in productivity. Risks to economic growth remai...

 EURUSD is rangebound post the ECB Decision holding 1.0900 resistance and 1.0870 support. Policy Rates Unchanged Inflation - Aside from an energy-related upward base effect on headline inflation, the declining trend in underlying inflation has continued Tight financing conditions are dampening demand, and this is helping to push down inflation. Future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary. The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction. PEPP Program =  reinvest, in full, the principal payments from maturing securities purchased under the PEPP during the first half of 2024.Over the second half of the year, it intends to reduce the PEPP portfolio by €7.5 billion per month on average. The Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024. The next 1 hour is likely to be vol...