The market demands it and the ECB does not always comply with its wishes. Analysts who follow the central bank said there would be a break for the next October meeting and a further cut for the December meeting, leaving interest rates at 3.25%. Bank of America has broken expert consensus and believes Lagarde will announce a further rate cut by the October 17 meeting.
“Clarice, do you hear the pigeons?“With this suggestive title, taken from the intense dialogues between Hannibal Lecter and Clarice Sterling from the film The silence of the lambs, Europe’s chief economist announced that the bank had changed the ECB’s forecasts to bring them in line with the market for the rest of the year.
“We are now planning consecutive reductions from October, so that the deposit rate reaches 2% in June 2025 and ends the year at 1.5%. Accelerated reductions have long been part of our base case, but outside the consensus, as have reductions below 2%, although they are now all expected to arrive six months earlier than initially planned,” says Rubén Segura-Cayuela. , in a note to customers.
Regarding this roadmap from the economist, for the next meeting on October 17, the ECB would carry out a further reduction in rates of 25 basis points to leave them at 3.25% and on December 12 it would carry out another reduction to that rates are at 3%, and so on to end 2025 at the aforementioned 1.5%. And be careful, because even the market isn’t that ambitious about discounts at the moment.
Model predictions Overnight Indexed Swap (OIS)on the basis of financial swaps, They predict that rates in the eurozone will exceed 2% by November 2025.. There is still no data for the December meeting next year.
Segura-Cayuela assures that her new forecasts are due to the speech given last Monday by ECB President Lagarde in the European Parliament, using the same argument as for the September reduction as a consideration at the October meeting. “We doubt that he did it by accident, and we doubt that he did it without a sense of consensus within the ECB Governing Council. And we also doubt that once this acceleration begins, she may slow down again very soon.” he argues.
Many experts continue to maintain an outlook for a quarterly cut for the ECB, which leaves this October meeting on pause. According to market consensus Bloomberg only 37% of economists who follow the ECB envisage a rate cut for October. However, the market continues to put pressure and gives a 90% probability of this decline.
