What is the main topic?

The article discusses traders' confidence in ECB rate cuts due to weak euro zone growth.

How did the euro zone economy perform?

The euro zone economy stagnated last quarter, missing expectations for growth.

What are traders' expectations for ECB rates?

Traders expect the ECB to deliver three rate cuts by year-end, with rates potentially falling below 2%.

Editorial & Advertiser disclosure

Global Banking & Finance Review® is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

Home > Finance > Weak growth, ECB boost traders' euro area rate cut confidence

Finance

Weak growth, ECB boost traders' euro area rate cut confidence

Published by Global Banking & Finance Review®

Posted on January 30, 2025

3 min read

Last updated: January 26, 2026

Graph showing euro area bond yields and ECB rate cuts impact - Global Banking & Finance Review — Visual representation of euro area bond yields reacting to recent ECB rate cuts, reflecting trader confidence amidst weak economic growth data. This image illustrates the link between ECB monetary policy and market trends.

Traders Confident in ECB Rate Cuts Amid Weak Euro Growth

By Yoruk Bahceli and Samuel Indyk

LONDON (Reuters) - Traders grew more confident on Thursday that the European Central Bank will deliver three more rate cuts this year as weak growth data followed by the bank's latest rate reduction highlighted the need for more easing.

The ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB cut rates by 25 basis points to 2.75%, as expected and kept the door open to further policy easing, helping push two-year German bond yields to three-week lows around 2.18%.

The bank's decision came hot on the heels of data showing the euro zone economy unexpectedly stagnated last quarter, falling short of expectations for a 0.1% expansion, as two straight years of contraction in Germany weighed on the bloc as a whole.

That added to the gloom as U.S. President Donald Trump's tariff threats cast a shadow on the outlook for the bloc's already sluggish economy, though he has so far not imposed blanket tariffs as feared.

Traders became more confident that the ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB would deliver three more rate cuts this year, now expecting 73 basis points of cuts by year-end, meaning more than a 90% chance of three cuts, slightly raising their expectations on Thursday.

Last Friday, they were pricing in around a 60% chance of three moves.

"There is really no reason to think the ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB won't continue to cut rates, at least to a neutral level, and we think quite probably below neutral by year-end," said Deutsche Bank chief European economist Mark Wall.

Euro zone bond yields dropped with Germany's two-year yield, sensitive to interest rate expectations, set for its biggest daily fall since late November with falls of almost 10 bps.

Its 10-year yield, the benchmark for the euro zone, was down 7 bps to 2.50%.

The euro, which usually takes a hit from rising rate cut bets, was 0.1% higher on the day as the dollar weakened on the back of weaker-than-expected U.S. growth data.

The pan-continental STOXX 600 index was up 0.7%, relatively unmoved by the growth data or the ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB. An index of euro zone bank stocks held near its highest since 2011 it rose to earlier.

With the bloc facing a bleak outlook, some analysts said the ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB would have to cut rates below the 2% markets expect to see by year-end. That falls in line with estimates for the so-called neutral rate in the euro zone, which neither restricts or boosts growth.

"I think we’re going to go lower than that, question is how much lower," said Danske Bank chief analyst Piet Christiansen, who expects the ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB-POLICY-3fdc7763-f2c0-4c30-b494-8614852eaf43>ECB-POLICY-SOURCES-e4bab80d-7aeb-4e49-a29a-ce14e1595c6d>ECB to cut to 1.5%.

A March rate cut was "definitely" on the cards, Christiansen said, echoing market expectations of nearly a 90% chance of such a move.

"But what happens after that... we still have to see," he said.

(Reporting by Samuel Indyk, Dhara Ranasinghe, Yoruk Bahceli and Stefano Rebaudo, writing by Yoruk Bahceli; Editing by Amanda Cooper and Dhara Ranasinghe)

Weak growth, ECB boost traders' euro area rate cut confidence

Quick Summary

Traders Confident in ECB Rate Cuts Amid Weak Euro Growth

Key Takeaways

Frequently Asked Questions about Weak growth, ECB boost traders' euro area rate cut confidence