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Finance

Factbox-Big banks expect a quarter-point cut for ECB's first meeting of 2025

Published by Global Banking and Finance Review

Posted on December 13, 2024

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(Reuters) - Major brokerages including Bank of America, Goldman Sachs and Citigroup expect the European Central bank to cut interest rates by 25 basis points again at its first meeting of 2025 on Jan. 30 as inflation slows.

Forecasters at financial institutions also see further rate cuts in 2025, with the ECB's benchmark rate largely expected to fall below the 2%-2.5% range economists view as neutral, meaning it neither stimulates nor restricts the economy.

Money markets show traders see euro zone rates falling to around 1.85% by the end of next year, from 3% now. .

Euro zone business activity declined sharply in November, PMI showed last week, as the bloc's dominant services sector joined the manufacturing sector in contracting.

Inflation in the euro zone, meanwhile, edged up to 2.3% in November, from 2.% in October. The ECB now expects inflation across the single-currency bloc to reach 2.1% next year and 1.9% in 2026, roughly in line with its 2% target rate.

Forecasts of major brokerages before the January policy meeting:

Brokerage Jan'25 rate cut 2025 Terminal rate/end

forecast (bps) forecast '25 forecast

(bps)

BofA Global 25 150 1.50% (Sept 2025)

Research

Goldman Sachs 25 125 1.75% (July 2025)

ING 25 125 1.75% (July 2025)

J.P.Morgan 25 125 1.75%

Citigroup 25 150 1.50%

Barclays 25 150 1.50%

Morgan Stanley 25 - 1% (2026)

Deutsche Bank 25 150 1.50%

Societe 25

Generale

Wells Fargo 25 125 1.75%

Nomura 25 125 1.75% (Sept 2025)

Peel Hunt 25 100 2.00%

UBS 25 100 2.00% (June 2025)

(Reporting by Lucy Raitano and Greta Rosen Fondahn; Editing by Amanda Cooper)