A bit of a different take on the ECB rate cut. In a recent note, PIMCO highlighted that while the European macroeconomic outlook is softer than anticipated, risk management continues to drive central bank decisions.
The analysts suggested that any unexpected inflationary pressures could lead the European Central Bank (ECB) to slow the pace of future rate cuts, although last Thursday’s reduction provides a safeguard against downside risks. Despite persistent inflation, largely fueled by price pressures in the services sector, PIMCO expects the ECB to maintain a tight monetary policy stance for the time being. The firm emphasized that upcoming economic data will be crucial in determining how quickly the ECB eases its restrictive policies. PIMCO also anticipates that the ECB’s Governing Council will engage in discussions about the appropriate neutral policy rate next year, particularly once the rate falls below 3%. The firm believes that another rate cut is likely in December, and views market pricing for a terminal rate of around 1.85% in the second half of 2024 as reasonable.
European Central Bank President Lagarde
This article was written by Eamonn Sheridan at www.forexlive.com.
