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ECB VIEW: Santander See Strong Case For Rates At Lower End Of Neutral

ECB VIEW
BundesbankCentral Bank NewsFixed Income BulletsCEEMEAEurozoneGermanyBulletMarketsEuropean Central BankForeign Exchange Bullets
  • Santander expect the ECB to cut its deposit facility rate 25bp to 2.75% on Thursday.
  • “We continue to expect the ECB to keep on delivering 25bp rate cuts in the remaining three meetings in 1H25, to take its DFR to 2%.”
  • Whilst “quite confident with this long-held call, we think that the risks to it are more to the downside (taking rates slightly below neutral) than on the upside.”
  • “By June, we will all have much more details about the new trade policies of the new US administration and its potential macro implications.”
  • “We do not expect the ECB’s macro assessment to have changed materially, and definitely not as much as the latest market repricing suggests.”
  • “We continue to think there is a strong case to take official rates to the lower end of the range of estimates for neutral by mid-2025, with risks tilted towards the potential impact of trade frictions leading to considering even slightly lower rates. Additionally, neutral rates are no longer a taboo for ECB members and there seems to be a broad consensus around the 2% level.”
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  • Santander expect the ECB to cut its deposit facility rate 25bp to 2.75% on Thursday.
  • “We continue to expect the ECB to keep on delivering 25bp rate cuts in the remaining three meetings in 1H25, to take its DFR to 2%.”
  • Whilst “quite confident with this long-held call, we think that the risks to it are more to the downside (taking rates slightly below neutral) than on the upside.”
  • “By June, we will all have much more details about the new trade policies of the new US administration and its potential macro implications.”
  • “We do not expect the ECB’s macro assessment to have changed materially, and definitely not as much as the latest market repricing suggests.”
  • “We continue to think there is a strong case to take official rates to the lower end of the range of estimates for neutral by mid-2025, with risks tilted towards the potential impact of trade frictions leading to considering even slightly lower rates. Additionally, neutral rates are no longer a taboo for ECB members and there seems to be a broad consensus around the 2% level.”