Highlights:

• At today’s meeting, the ECB’s Governing Council (GC) left its key rates unchanged, in line with ex-pectations. 
• Most importantly, the GC noted that “inflation has declined further”. In the updated macro projec-tions the expected inflation path has shifted down and annual headline as well as core inflation are now expected to be in line with target by 2026 while high domestic price pressure “in part owing to strong growth in wages” persists. 
• Altogether, the GC’s confidence in the decline of inflation increased but it is not yet sufficiently high to act. Rate cuts were not discussed today while awaiting pivotal wage data over the second quarter.
• We stick to our call of a first 25 bps rate cut by June and continue to see cumulative cuts of 100 bps in 2024. Markets left the expected path of key rate cuts almost unchanged and assessed to-day’s ECB meeting as mildly dovish.  
   

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