June 7, 2024

ECB Delivers First Cut of the Cycle

ECBRates

What Happened

On June 6 the ECB lowered its deposit rate by 25 bps to 3.75%, its first cut after a rapid hiking cycle. The statement noted inflation progress but warned that price pressures were still elevated, and staff projections showed slow disinflation.

What It Means

The ECB moved ahead of the Fed, betting that cooling growth and easing inflation justify a start to normalization. Markets priced a measured path of future cuts rather than a quick slide, reflecting uncertainty about wages and energy.

What I Think

This is a cautious pivot, not a rush for the exit. I expect the Governing Council to move slowly, spacing cuts while watching services CPI. The euro’s reaction should stay muted unless growth data deteriorate sharply.

Market Terms

First cut to 3.75% – ECB trimming the deposit rate after its hike cycle.
Growth-cooling rationale – Slower activity used to justify easing.
Measured path signal – Markets pricing gradual follow-on cuts.
Services inflation watch – Council focused on wage and service pressures.