The European Central Bank has pledged to take a data-dependent approach to monetary policy. Yet on Thursday it seems almost certain to brush off the recent upturn in Eurozone inflation and start cutting rates anyway.
It will be hard for ECB policymakers to do anything else after many of them signalled clearly that it is on track to become the first major central bank to start lowering borrowing costs since the biggest price surge for a generation started three years ago.
Greg Fuzesi, an economist at JPMorgan, called the likely 0.25 percentage point cut in the ECB’s 4 per cent deposit rate “somewhat rushed and odd”, adding that “the cost of waiting until September appears low while the benefit of getting more clarity on the inflation outlook appears high”.