ECB predicted to deliver first rate cut this spring despite pushing back against market bets 

ECB officials signalled the chance of a move around mid-year, when they’ll know more about inflation, wages and the stuttering economy

European Central Bank president Christine Lagarde. Next week's ECB press release expected to be 'a copy-and-paste job from December'.

The European Central Bank will deliver its first interest reduction in the spring even as central bankers push back against financial markets betting on an early-year cut, a leading consultancy has predicted. 

Capital Economics said data evidence "hasn't changed enough" for ECB president Christine Lagarde to soften her stance against early rate cuts in the first half of the year when the governing council gathers in Frankfurt next week, but the consultancy predicts the bank will "nonetheless" cut in the second quarter. 

"Facts haven’t changed enough to change minds At the ECB’s last press conference, in December, President Lagarde was clear that interest rate cuts were not on the agenda. Not enough has changed since then for policymakers to change that message," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics. 

"In their recent public comments, including at Davos, most ECB policymakers have continued to push back against expectations for interest rate cuts in the first half of the year. This will almost certainly be the message next week too," Mr Allen-Reynolds said.

"The upshot is that we expect most of next week’s press release to be a copy-and-paste job from December," he said. 

It comes as ECB officials, who until recently had been wary of even discussing interest rate cuts, now look increasingly open to commencing them in June.

Speaking this week in Davos, Ms Lagarde and several of her colleagues dismissed investor bets on reductions before then. But they signalled the chance of a move around mid-year, when they’ll know more about inflation, wages and the stuttering economy, as well as the harm to supply chains by Yemen’s Houthi rebels.

Quizzed on a summer rate cut, Ms Lagarde had described the prospect as “likely”. While cautioning uncertainty remains high and not all indicators are where the ECB would like them to be, her message nudged markets a little and was interpreted as a clear indication of intent.

“The statements came as a bit of a surprise — when the ECB president says something like that, it’s like a pre-commitment,” said Carsten Brzeski, global head of macro at ING. 

“After the statements, a rate cut in June seems very likely.” 

• Additional reporting Bloomberg