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Goldman Sachs No Longer Expect Back-to-Back ECB Rate Cuts in June/July

ECB VIEW
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  • In a note dated yesterday, Goldman Sachs revise their call for ECB policy and no longer expect a rate cut in July. They still see easing at the June meeting, and then quarterly cuts thereafter - meaning ECB will enact three 25bps cuts this year at the June, September and December meetings.
  • They expect the ECB to maintain this pace across 2025, resulting in a terminal rate of 2.25% by year-end 2025. Goldman Sachs add that they see a 30% chance that stickier inflation in the Eurozone will mean the Governing Council shifts to semi-annual rate cuts after June, but also see a notable risk of faster moves on policy, assigning a 15% chance of back-to-back cuts due to quicker disinflation and deeper cuts should the labour market weaken sharply (10%).
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  • In a note dated yesterday, Goldman Sachs revise their call for ECB policy and no longer expect a rate cut in July. They still see easing at the June meeting, and then quarterly cuts thereafter - meaning ECB will enact three 25bps cuts this year at the June, September and December meetings.
  • They expect the ECB to maintain this pace across 2025, resulting in a terminal rate of 2.25% by year-end 2025. Goldman Sachs add that they see a 30% chance that stickier inflation in the Eurozone will mean the Governing Council shifts to semi-annual rate cuts after June, but also see a notable risk of faster moves on policy, assigning a 15% chance of back-to-back cuts due to quicker disinflation and deeper cuts should the labour market weaken sharply (10%).