Repeats With No Changes (Originally Posted Dec 10

Dec 12 (Reuters) - The European Central Bank Is Expected to Deliver Another 25BP Rate Cut at Its December Meeting. That Has Been the Constant Message From Policymakers Leading Into the Decision, Despite Another Soft Set of PMI Figures, Which Had Prompted Markets at One Point to Price in a Near 50% Chance of a 50BP Cut.

With Officials Remaining Resolute That a Gradual Pace Is Needed, 50BP Cut Bets Have Since Been Unwound.

Headline and Core Inflation Have Continued to Undershoot the Bank’s Economic Projections, but Have Not Been Weak Enough to Suggest a Larger Cut Is Needed.

Another Theme That Has Gained Traction Since the October Decision Is Whether the ECB Will Cut Rates Below Neutral.

There Is a Significant Degree of Uncertainty as to Where Neutral Is Although Many Market Participants, Including the ECB, Assume It Is Somewhere Around 2.0-2.25%.

Currently, Markets Have Priced Rates Falling Below 2% by June 2025, Hitting 1.65% by the End of Next Year, a Significantly More Dovish Outlook Than That Suggested by the ECB's Rhetoric.

While the Doves on the Governing Council – Namely François Villeroy and Fabio Panetta – Appear to Be Open to a Move Below Neutral, They Are Clearly in the Minority With the More Influential Members, Such as Isabel Schnabel, Stating Such a Move Is Not Appropriate.

Overall, the ECB Is Facing Greater Downside Economic Risks, Evidenced Not Only by the Data but Also the Result of the U.S. Election, With the Threat of U.S. Tariffs Creating a More Uncertain Outlook.

For More Click on Fxbuz

(Justin Mcqueen Is a Reuters Market Analyst. the Views Expressed Are His Own.)

((Justin.mcqueen@Thomsonreuters.com))