From Morningstar: 2024-09-10 05:26:00

The European Central Bank will likely announce a 0.25 percentage point rate cut at its September 12 meeting, following the trend of rate cuts initiated in June. Economists predict further rate cuts due to supportive macroeconomic data and inflation close to the 2% target.

Most economists expect cautious rate cuts of 0.25 percentage points in September and December, with one more cut in October. Inflation is on track to meet the ECB’s 2% target in 2026, but uncertainty remains due to energy prices and market discrepancies between equities and bonds.

Fidelity predicts two 0.25 percentage point interest rate cuts in 2024, lowering rates to 2.50% by September 2025. DWS also forecasts two cuts this year and quarterly cuts in 2025. Both firms expect inflation to remain above 2% throughout 2025, with the possibility of faster cuts in the US impacting ECB decisions.

DWS anticipates downward revisions to GDP growth forecasts at the September meeting. Economists expect GDP growth to be slower than previously forecasted, with growth estimated at around 1% in 2025 despite the ECB’s June predictions.

Equity markets are likely to rise with anticipated rate cuts, while bond markets will see lower yields and higher bond prices. Cash savings rates may decrease, impacting savers negatively, but benefiting borrowers with lower rates on consumer debt and mortgages.

The ECB is expected to reduce GDP growth forecasts at its September meeting. The market will react positively to anticipated rate cuts, with lower yields in bond markets, decreased savings rates for savers, and cheaper consumer debt and mortgages for borrowers.



Read more at Morningstar: ECB Rates Decision: What to Expect on September 12