17 Oct 2024

ECB cut the key rates by 25bps as expected.

Depo rate to 3.25%, Main Refi to 3.4%. Guidance is unchanged: ECB to follow data-dependent, Meeting-by-Meeting approach. • Even after this third rate cut of the year, monetary policy remains restrictive in Europe, with the real short-term rate still at a level not seen over the past 15 years. Given the ongoing dynamics in economic activity and inflation, this implies that the ECB will have to continue to lower rates in the coming months, in order to bring its monetary policy to a neutral stance at minimum. Rate cuts at the coming meetings are therefore to be expected, in December and in the course of 2025. Given the worrying trend in economic activity data, an acceleration in the pace of rate cuts, with a possible 50bp cut at the December meeting, cannot be ruled out. If growth in the Eurozone stalls, a faster pace of rate cuts to remove the restrictiveness of the monetary policy, or even to move it into supportive territory, might prove to be warranted. Source chart: Bloomberg

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