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The ECB will maintain rates in its last meeting of 2023 and will seek to cool the expectation of imminent cuts

Experts expect a first rate cut in June and a 75 basis point cut in 2024.

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The ECB will maintain rates in its last meeting of 2023 and will seek to cool the expectation of imminent cuts

Experts expect a first rate cut in June and a 75 basis point cut in 2024


The Governing Council of the European Central Bank (ECB) will keep interest rates unchanged at its meeting this Thursday, the last of 2023, and will try to lower expectations of an upcoming rate cut, something that, despite the good progress of the disinflationary process, would not occur before June 2024, according to the analysts consulted by Europa Press.

Although the market consensus assumes that the ECB's monetary policy has entered a new chapter after the better-than-expected inflation data in November, when the rise in prices moderated to 2.4%, experts do not They expect no sign from the entity that the cuts may arrive in spring and consider that the institution will prefer to wait at least until June.

In this sense, Bank of America analysts anticipate that the ECB will remain "waiting" at its meeting tomorrow and both the entity's communication and the new forecasts that will be announced will open the door to rate cuts, but not immediate.

In this way, although they recognize that the options for a cut in April have increased, they emphasize that they are not yet obvious. "We stick to a first quarterly cut in June and faster measures in 2025," they point out, while they contemplate the possibility that the ECB decides to end the reinvestments of its debt purchase program due to the pandemic emergency, PEPP, sooner than expected. .

Along the same lines, Gilles Moëc, chief economist at Axa Investment Managers, points out that the president of the ECB, Christine Lagarde, could use the new forecasts that will be published this Thursday to point out that, although rate increases are no longer on the table, It will be necessary to wait until 2025 for inflation to return to the target, a perspective that does not justify early cuts.

"Our base scenario for the first cut is still June 2024," says Moëc, for whom, although the speed of disinflation makes an earlier cut plausible, "in the second quarter", he does not see the reason why the ECB I would like to start this debate right now.

"We believe that it is better to maintain a stable course," says the expert, adding that the Governing Council of the ECB will continue to defend its dependence on data to try to convince the market that the cut planned for March "is too early, but that it remains open to a move later in 2024.”

Thus, Raphael Olszyna-Marzys, international economist at J. Safra Sarasin Sustainable AM, joins the unanimity of experts who do not expect changes in the price of money at today's meeting, while anticipating that Lagarde will make an effort to remember that underlying inflation remains too high and that further progress must be made to reduce wage inflation.

"Unfortunately, until spring the Bank will not have more certainty on this matter (...) In short, President Lagarde will insist that it is too early to draw hasty conclusions," he comments.

Martin Wolburg, senior economist at Generali Investments, is more emphatic, for whom a rate cut in spring is "unlikely", although he admits to being undecided "between June and September."

"We find it slightly more likely that the ECB will begin its cycle of 25 basis point quarterly cuts already in June," says the expert, adding that the ECB is likely to cut rates by 75 basis points throughout 2024.

For his part, Felix Feather, abrdn economist, assumes that the Governing Council will not consider an increase at this meeting, since, in fact, in view of the data, a cut "seems a reasonable proposal", although he emphasizes that those responsible for the ECB have made it very clear that, for the moment, it is not planned.

In any case, the economist points out that if the language regarding maintaining rates at current levels for a sufficiently long period is softened, "the ECB could be opening the door to cuts sooner than expected."