ABN AMRO Push Back Call On Timing Of First Cut

ABN AMRO expect “the ECB to cut its policy rates for the first time in March of next year, changing our call for a first reduction which was previously December of this year. This largely reflects the resilience in services inflation and the labour market up until now. However, we continue to expect the ECB to pivot significantly over the next few months, with no further hikes this year and March kicking off a series of rate cuts, taking the deposit rate to 2% by year end.”

• “We expect less favourable activity outcomes than projected by the ECB and the consensus. Given the timing of the rate hikes we are likely to see major drags on the economy in the second half of this year and first half of next year.”
• “Second, we think core inflation could come down more significantly over the coming months.”
• “Third, monetary policy is in deeply restrictive territory.”
• “We do not expect the ECB to step up the pace of QT in the coming months, but neither do we expect any reversal.”