ECB’s Rehn: Risk of inflation undershooting target should neither be underestimated

• There is no reason for self-complacency in Europe.
• We must be vigilant now to both directions.
• We have to closely monitor geopolitical developments and price developments in energy markets.
• The trade war seems to dampen inflation in the Euro Area rather than increase it.

The ECB has now reached the mid-point of their neutral interest rates band (1.75%-2.25%). There is a will to cut one last time and get to the lower band but they are now taking a pause at least until September to see how the data evolves throughout the summer.

The market is fully pricing in a 25 bps cut for December.

This article was written by Giuseppe Dellamotta at www.forexlive.com.