ECB July meeting preview: no action, no guidance

The ECB’s July meeting will be uneventful. We expect policy rates to be kept on hold and little new information to emerge from the meeting regarding the path ahead. Data released since the June meeting will have re-enforced the cautious meeting-by-meeting approach of the ECB. That said, the data still remain in principle consistent with the ECB’s baseline scenario of a gradual decline in core inflation and wage pressure and we expect the ECB to cut rates again in September. It is likely that President Lagarde will be asked in the context of the French elections under what circumstance s the ECB would be willing to intervene in bond markets in case of financial stress . We expect Mrs Lagarde to simply point to the rules behind the activ ation of the ECB’s TPI program that, among other things, foresee compliance with European fiscal rules.