Higher defence and infrastructure spending will support euro-zone GDP growth late this year and in 2026. But the boost will be smaller than some are hoping for and take time to feed through. So we expect the recent economic weakness to continue in the near term. This, together with further falls in core inflation, should prompt the ECB to cut its deposit rate twice more this year, to 2.0%.
Elsewhere, we think that the SNB and Norges Bank will cut rates in March, but the Riksbank’s loosening cycle is over.
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