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MNI ECB Preview, Jan'25: An 'Easy' Step Nearer Neutral

The ECB is expected to cut its key rates 25bps this week before discussions on a possible end-point start more earnestly
Central Bank PreviewBundesbankCentral Bank NewsHomepageECB - PreviewCEEMEAEurozoneGermanyCentral Bank ReportsMarketsStory

EXECUTIVE SUMMARY

  • The ECB is fully expected to cut its three key rates by 25bp on Thursday, taking its deposit rate to 2.75%.
  • It’s a step closer to neutral rates, which President Lagarde sees in the 1.75-2.25% range, something that should make this decision relatively straightforward.
  • More in-depth discussions around neutral should start to take more prominence but we expect greater focus on that to come with the next meeting in March and its fresh quarterly forecasts.
  • With no changes in key guidance expected, we expect commentary around US policy spillovers to set the tone for the press conference.
  • The market currently mostly prices another 25bp cut in March, perhaps leaving some modest asymmetric risk to a hawkish surprise.
  • Terminal rates meanwhile are priced at circa 2% having lifted some 30bps since the last meeting. Analysts are more mixed here, with a wide range of 1-2.25% seen across the 24 analysts reviewed below.

Please find the full report here: ECBPreview - Jan2025.pdf

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EXECUTIVE SUMMARY

  • The ECB is fully expected to cut its three key rates by 25bp on Thursday, taking its deposit rate to 2.75%.
  • It’s a step closer to neutral rates, which President Lagarde sees in the 1.75-2.25% range, something that should make this decision relatively straightforward.
  • More in-depth discussions around neutral should start to take more prominence but we expect greater focus on that to come with the next meeting in March and its fresh quarterly forecasts.
  • With no changes in key guidance expected, we expect commentary around US policy spillovers to set the tone for the press conference.
  • The market currently mostly prices another 25bp cut in March, perhaps leaving some modest asymmetric risk to a hawkish surprise.
  • Terminal rates meanwhile are priced at circa 2% having lifted some 30bps since the last meeting. Analysts are more mixed here, with a wide range of 1-2.25% seen across the 24 analysts reviewed below.

Please find the full report here: ECBPreview - Jan2025.pdf

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