ECB Watch: Moving from unanimity to dissent at the ECB

The ECB looks very likely to reduce interest rates by 25bp next week, taking the deposit rate to 2.50%, but this will probably be the last “no-brainer” cut for some time. We expect the Bank to drop its description of monetary policy as “restrictive” from the press release, and Christine Lagarde might no longer say that the future direction of interest rates is “clear”. Nevertheless, we think that continued weak growth and softening underlying price pressures will prompt the Bank to cut interest rates by more than is discounted in the market.