Summary. The ECB has all but pre-committed to a June interest rate cut. This is in contrast to its data dependent strategy and the – eminently sensible – communications framework it has built around it. The ECB should remain faithful to the framework, rather than yielding to the temptation to provide forward guidance – for the long-term benefit of both financial markets and the bank’s credibility.
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The ECB Should Resist the Forward Guidance…
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Summary. The ECB has all but pre-committed to a June interest rate cut. This is in contrast to its data dependent strategy and the – eminently sensible – communications framework it has built around it. The ECB should remain faithful to the framework, rather than yielding to the temptation to provide forward guidance – for the long-term benefit of both financial markets and the bank’s credibility.