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ECB VIEW: Nomura Remove Cuts In April and September, Terminal Now 2.25%

ECB VIEW
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Nomura have also made a hawkish adjustment to their ECB forecast on the back of Tuesday’s German fiscal announcement. They remove 25bp cuts in April and September from their forecast, now expecting only 25bp cuts in March and June for a terminal rate of 2.25%.

  • They note that “prior to the fiscal announcements, a rate cut in April was finely balanced”, citing solid underlying services inflation momentum, increasing PMI output price indices and pockets of hawkish ECB speak.
  • “A risk to our new view is that the ECB could opt to cut in April and stop the cutting cycle in June once the new forecasts incorporate the fiscal stimulus”.
  • “Although we continue to expect punitive tariffs, we believe the positive growth impact from fiscal stimulus will more than outweigh the hit to growth from US tariffs, which means the ECB will likely need to be less concerned about tariffs than previously”.
  • Nomura have revised their Euro area growth and inflation forecasts higher following the fiscal news. They expect “the fiscal packages to add nothing to euro area GDP in the first three quarters of this year, +0.1pp by the very end of this year, and +0.2pp by the end of 2026”, while “2026 HICP inflation and core HICP inflation are likely to average 20bp higher than previously; we now forecast both to average 2%”. 
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Nomura have also made a hawkish adjustment to their ECB forecast on the back of Tuesday’s German fiscal announcement. They remove 25bp cuts in April and September from their forecast, now expecting only 25bp cuts in March and June for a terminal rate of 2.25%.

  • They note that “prior to the fiscal announcements, a rate cut in April was finely balanced”, citing solid underlying services inflation momentum, increasing PMI output price indices and pockets of hawkish ECB speak.
  • “A risk to our new view is that the ECB could opt to cut in April and stop the cutting cycle in June once the new forecasts incorporate the fiscal stimulus”.
  • “Although we continue to expect punitive tariffs, we believe the positive growth impact from fiscal stimulus will more than outweigh the hit to growth from US tariffs, which means the ECB will likely need to be less concerned about tariffs than previously”.
  • Nomura have revised their Euro area growth and inflation forecasts higher following the fiscal news. They expect “the fiscal packages to add nothing to euro area GDP in the first three quarters of this year, +0.1pp by the very end of this year, and +0.2pp by the end of 2026”, while “2026 HICP inflation and core HICP inflation are likely to average 20bp higher than previously; we now forecast both to average 2%”.