ECB Watch: To cut or not to not cut – Nordea

The ECB is almost certain to cut rates by 25bp next week. While the central bank is set to refrain from any firm guidance on future steps, we think staff forecasts showing inflation at target in the medium-term support a quarterly pace of rate cuts, Nordea’s economists Jan von Gerich and Tuuli Koivu note.

ECB is set to deliver another 25bp rate cut

“The ECB is set to deliver another 25bp rate cut, and we expect the communication to be in line with our view of continued quarterly rate cuts. No clear signals about the timing of further policy steps should be expected.”

“The staff inflation forecast for the near-term will likely see small upward revisions, while the medium-term numbers are set to point to inflation stabilising around the two per cent target. Financial markets could see somewhat dovish moves on any soft-sounding comments from Lagarde.”