VIEW: Goldman Now Look For Cuts At Each Meeting From April, Rates To Move To 2.25%

As part of their ECB preview Goldman Sachs note that “looking beyond next week, we now see prospects for substantially faster disinflation. In particular, the recent cooling of core inflation suggests that the pass-through effects from the energy crisis into underlying inflation are fading much more quickly than anticipated. This would be consistent with economic models that show how “big shocks travel fast” and the serial correlation of inflation forecast errors since the pandemic.”

• “Given our revised inflation profile, we expect the first rate cut in April and now look for faster cuts of 25bp per meeting (vs 25bp per quarter before) until the deposit rate reaches 2.25% by early 2025.”
• “While it is possible that the Council cuts rates with the new projections in March, we view April as somewhat more likely given our expectation for firmer growth, the ongoing strength in wage growth and more data to confirm the slowdown in underlying inflation.”