We expect the euro-zone economy to grow at only a sluggish pace this year, with southern economies outperforming the core. Germany’s election will lead to only a modest loosening of its restrictive “debt brake”. France’s budget deficit will remain very high amid continued policy deadlock, leaving France’s bond market vulnerable to a loss of investor confidence. Meanwhile, with euro-zone inflation likely to average 2% this year and less than that in 2026, we forecast the ECB to cut interest rates further than investors anticipate, taking the deposit rate down to 1.5%.
Elsewhere, we think that the SNB and Norges Bank will cut rates in March, but the Riksbank’s loosening cycle is over.
Subscriber content
Read this in full, free
Start a free trial and use one of your 10 free starter credits to unlock this piece.