Expert Analysis: ECB Cuts Deposit Rate by 25bp, What to Expect Next
As the world’s leading investment manager, I anticipated the ECB’s decision to cut the deposit facility rate by 25bp to 3.50%. This move was widely expected and was made by the Governing Council in a unanimous decision. Looking ahead, the ECB remains cautious and non-committal about its future actions, keeping investors on their toes.
According to Deutsche Bank’s macro analysts, the market is showing signs of skepticism towards growth and inflation, pricing in a more aggressive easing cycle with quicker cuts leading to a terminal rate slightly below neutral. However, the ECB is not fully convinced of this scenario. Despite uncertainties such as domestic inflation and potential trade wars, the ECB is maintaining a balanced approach to its policy decisions.
Looking towards the next Governing Council meeting in December, the ECB is keeping its options open regarding a rate cut. With more data available and the outcome of the US election influencing global markets, the ECB will have a clearer picture of the economic landscape. Our analysis suggests that the ECB is likely to cut the deposit rate by 25bp in December and continue this trend quarterly until it reaches a neutral rate around the end of 2025.
While risks exist for a faster normalization of monetary policy, the need to go below neutral rates is not yet apparent. The key factor influencing future decisions will be fiscal policy and its impact on the economy.
Expert Analysis Breakdown:
- ECB cuts deposit rate by 25bp to 3.50% in expected move
- Market shows skepticism towards growth and inflation, pricing in aggressive easing cycle
- ECB remains cautious and non-committal about future rate cuts
- December meeting to provide more clarity on ECB’s actions
- Expectation of gradual rate cuts until reaching neutral rate by end of 2025
- Risks exist for faster normalization of monetary policy, dependent on fiscal policy