Deutsche Bank Tweaks ECB Call

Deutsche Bank continue to “believe the first rate cut will be in April rather than June, but recent data and commentary is consistent with a more gradual easing cycle than we had thought.”

• They note that they “continue to forecast 150bp of cuts in 2024 and a further 50bp of cuts in 2025, but we now see this easing cycle as more likely consisting of quarter point cuts than anything larger.”
• “Previously, we had thought the ECB would need to reset the level of rates more rapidly with back-to-back 50bp cuts in April and June.”
• “Uncertainty is high, however, and the parameters of the easing cycle will remain subject to change.”
• “Peak transmission is also starting to be debated.”
• Their ’24 easing call remains more aggressive than what is priced into markets at this juncture, with ECB-dated OIS showing ~106bp of cuts over that horizon at present.