“Dovish” 25bp rate cut likely next week

While there is a strong case for the ECB to accelerate the pace of policy easing by delivering a 50bp cut next week, a majority of the Governing Council seems to prefer 25bp, which would bring the deposit rate down to 3.0%. That said, we think the policy statement will signal that, with downside risks clearly mounting, monetary policy can shift to a more neutral stance before long. And we continue to think the ECB will cut its deposit rate further than investors anticipate next year.

We’ll be discussing the outlook for ECB, BoE and Fed policy in a 20-minute online briefing at 3pm GMT on Thursday 19th December. (Register here.)