CAC: Stocks Get Let Down by Lagarde’s Post MPC Meeting and 0.25% Cut

Investors have cut back their expectations for back-to-back rate cuts after the ECB’s president called for restrictive monetary policy for as long as needed.

Lagarde, at the post meeting conference, said that the path for rate cut was not predetermined. Leaving little clarity on the path forward for future monetary loosening. The central bank cut its key deposit rate to 3.50% as expected.

According to Reuters, unmentioned sources told the outlet that another rate cut in October was unlikely unless there was a substantial deterioration in growth outlook. Yields for Eurozone government bonds shot up post meeting.

The increase in EGBs’ yields showcases how the market is readjusting its expectations on the schedule for interest rate cuts. The 2-year German bond yield, sensitive to the ECB near policy, rose by 10 basis points.

The jump in yield was the biggest one-day increase in nearly a month. The euro also edged higher reaching 1.1040, an increase of 0.25%. On the political front, Macron finally appointed a new prime minister.

French Assembly Gets New Prime Minister

The president of France appointed Michel Barnier, a member of the conservative Republican party. He will elect his cabinet of minister over next week, but most importantly the government will have some sort of functionality.

However, just how effective this appointment will be remains to be seen. The Republican party needs the votes of other parties such as BSW and National Rally. Both parties have fundamentally opposing views on many matters.

The one matter where there is considerable convergence is immigration. Barnier has stated that he wants to prioritize limiting illegal immigration. This is a policy both the BSW and National Rally, on opposite poles of the political spectrum, also agree on.

The 3 parties may be distant on other policies such as taxation and national budget. However, it’s likely that to push through legislation on illegal immigration these parties may be able to come to agreements.