ECB President Lagarde reaffirmed the case for a rate cut next week. The ESTR curve is pricing in cuts next week and in March. Tensions appear to exist among the Council hawks, which could result in a more balanced than categorically dovish decision next week. Holzmann made the case to wait a bit longer for the next rate cut, Societe Genrale’s team of experts notes.

Cutting pace is dependent on incoming data

“For Lagarde, the ECB is not behind the curve on interest rates, the direction is clear and the pace is dependent on incoming data. She is not overly concerned on any inflation export from the US. Buba president Nagel called on the next government to consider adjusting the debt brake rules to allow for more investment in infrastructure and energy.”

“Business confidence in France improved a fraction to 95 in December. Canada’s retail sales disappointed in November but households were probably inclined to postpone spending until December when the sales tax was temporarily reduced. Core sales decreased by -0.7% in November.”

“Statistics Canada’s first estimate for December retail sales is +1.6% mom. Inflation slowed to 1.8% last month and the core (trimmed) decreased to 2.5%. The BoC is widely expected to lower the policy rate next week by 25bp to 3.0%. Norges Bank kept rates on hold at 4.50% and repeated that the policy rate will likely be reduced in March. In Japan, headline CPI accelerated to 3.6% in December, core rose to 3.0%.”

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