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ECB VIEW: Six More Analysts Call For October ECB Cut Overnight (2/2)

ECB VIEW
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  • Morgan Stanley: “We now expect the ECB to start a series of back-to-back 25bp cuts starting in October 2024 until March 2025. After reaching the vicinity of neutral rates in March 2025, it will revert back to a more gradual pace of rate cuts every quarter, reaching 1.75% by the end-2025, below neutral”.
  • Nomura: “We now expect the ECB to cut rates by 25bp once per meeting from October 2024 to June 2025, followed by a final 25bp cut in September 2025. This results in a terminal depo rate of 1.75% by September 2025”
    • “We now expect the ECB to cut rates to marginally below neutral (we believe neutral in the euro area is 2-2.5%). First, headline HICP inflation is increasingly at risk of undershooting the ECB’s target over the medium-term”… “Second, Germany’s recession, stagnation in France, and the lack of a euro area consumer-led recovery suggest the ECB will increasingly shift its focus towards economic growth concerns”.
  • SEB: “The ECB's September forecast for core inflation for the third quarter is too high. Add to this the weak PMI data a few weeks ago and an increasingly softer tone from several ECB members. The ECB has pushed its data dependency, and anything other than an October cut will now be difficult to justify”.
    • We also judge that the ECB will abandon its strategy of one interest rate cut per quarter, and that the central bank will instead continue to cut interest rates at each meeting and that the deposit rate will reach 2.00 per cent in June 2025”.
  • These analysts join ABN AMRO, Barclays, BNP, Danske, Goldman Sachs, HSBC, JP Morgan, RBC, TDS in calling for an October cut.
  • Note that ABN AMRO already had an October cut as their base case prior to last week’s flash PMI data. 
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  • Morgan Stanley: “We now expect the ECB to start a series of back-to-back 25bp cuts starting in October 2024 until March 2025. After reaching the vicinity of neutral rates in March 2025, it will revert back to a more gradual pace of rate cuts every quarter, reaching 1.75% by the end-2025, below neutral”.
  • Nomura: “We now expect the ECB to cut rates by 25bp once per meeting from October 2024 to June 2025, followed by a final 25bp cut in September 2025. This results in a terminal depo rate of 1.75% by September 2025”
    • “We now expect the ECB to cut rates to marginally below neutral (we believe neutral in the euro area is 2-2.5%). First, headline HICP inflation is increasingly at risk of undershooting the ECB’s target over the medium-term”… “Second, Germany’s recession, stagnation in France, and the lack of a euro area consumer-led recovery suggest the ECB will increasingly shift its focus towards economic growth concerns”.
  • SEB: “The ECB's September forecast for core inflation for the third quarter is too high. Add to this the weak PMI data a few weeks ago and an increasingly softer tone from several ECB members. The ECB has pushed its data dependency, and anything other than an October cut will now be difficult to justify”.
    • We also judge that the ECB will abandon its strategy of one interest rate cut per quarter, and that the central bank will instead continue to cut interest rates at each meeting and that the deposit rate will reach 2.00 per cent in June 2025”.
  • These analysts join ABN AMRO, Barclays, BNP, Danske, Goldman Sachs, HSBC, JP Morgan, RBC, TDS in calling for an October cut.
  • Note that ABN AMRO already had an October cut as their base case prior to last week’s flash PMI data.