Euro area inflation disappoints – we change our ECB call

Although headline inflation ease d in June to 2.5%, the details of the inflation report were rather disappointing, showing no genuine decline in the domestic inflationary pressure. While we still believe that core inflation and wage growth will moderate in the coming months, we think that the ECB will be cautious in adjusting its policy stance. We now consequently expect only two more cuts this year and see the deposit rate ending the year at 3.25%