Investors expect the European Central Bank to make bold decisions and approve 5 quarter-point rate cuts next year that would reduce the deposit rate to 1.75 percent, according to LSEG data.
“We also expect to discuss the merits of a deeper cut,” said Morgan Stanley economist Jens Eisenschmidt, given that growth risks “point to the downside.”
“We believe that the (European Central Bank) will want to find a way to express the expectation that rates can be reduced until a neutral level is reached,” Eisenschmidt added.
“We expect a softer tone on tightening,” Barclays economist Mariano Sena said in a note to clients, adding that he expected the ECB to stop “signaling an immediate move towards a neutral stance.”
The ECB will also unveil its updated forecasts for GDP growth and inflation, including the first forecasts for 2027.
Analysts expect growth forecasts to be lowered while inflation will sustainably reach the ECB’s 2 percent target earlier than previously thought next year.
