On Thursday 6 June, the ECB is widely expected to deliver a 25bp rate cut, largely because the governing council members have stated as much. The updated June staff projection is expected to suggest that the prevailing economic and monetary policy narrative stays broadly unchanged and we expect the rate cut to be formulated as a roll-back of the ‘insurance hike’ from September last year. We expect the ECB to repeat the meeting-by-meeting and data-dependent approach to the policy rate path beyond June.
We have revised our ECB rate path for the first time in more than 12 months and now expect the ECB to deliver two rate cuts this year (June and December), and three cuts next year. This will bring the deposit rate at 2.75% by the end of 2025.
Markets have already repriced the ECB expectations for this year and points to 61bp cut this year.
Full report in PDF.
