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VIEW: Goldman Bring Forward Rate Cut View

ECB

Late on Thursday Goldman Sachs noted that they are pulling forward their forecast for the first ECB policy rate cut from Q324 to Q224.

  • This comes as they lower their inflation forecast profile and flag German fiscal headwinds alongside a modest markdown in their Eurozone GDP growth forecast profile.
  • They also warn that “the labour market is now showing clear signs of slowing.”
  • They look for “a gradual cutting cycle with 25bp moves per quarter.”
  • Continued firm nominal wage growth is cited as a contributory factor to this view.
  • They note that “while we see a significant hurdle for rate cuts before Q2, the risks around our baseline are clearly skewed towards a faster cutting cycle if inflation continues to slow more quickly than expected or if growth fails to improve next year.”
  • They also maintain their baseline that “the Council will announce in January to limit PEPP reinvestments to EUR10bn per month from April, before stopping all reinvestments from Q324. But a formal decision is possible already in December.”
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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