To cut or not to cut – Nordea

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

The ECB is to cut a new interest rate by 25 bp

“The ECB is prepared to deliver another 25 basis point rate cut and we expect the communication to be consistent with our view of continued quarterly rate cuts. No clear signals should be expected about the timing of the next policy steps.”

“The near-term staff inflation forecast is likely to see small upward revisions, while medium-term figures will point to inflation stabilizing around the two percent target. Financial markets could see some dovish moves on any dovish comments from Lagarde.”