How Much Will the European Central Bank Cut Rates? Anticipating Lagarde's Statements

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How Much Will the European Central Bank Cut Rates? Anticipating Lagarde's Statements

The European Central Bank (ECB) will announce its interest rate decision today at 16:15 GMT. The expectation is for the deposit rate to be reduced by 25 basis points to 3%.

Meanwhile, while the market anticipates this move, there are speculations that a 50 basis point cut could create a surprise effect. Following the decision, ECB President Christine Lagarde's speech will be significant; if no alternative statement is made, a neutral market impact is expected.

The ECB continues to trend towards lowering borrowing costs in the Eurozone, grappling with dynamics such as economic weakness, political uncertainty, and the factors related to Trump. Economists anticipate that with inflation remaining moderate, cuts will continue into the last month of the year, and analysts predict that this trend may continue until 2025.

How will the interest rate cut process continue? Bank of America forecasts that the ECB could gradually lower rates to 1.5% by September 2025. Experts indicate that it will be challenging for the ECB to bring the deposit rate slightly below the neutral level of 2%. Danske Bank and Goldman Sachs have made similar predictions, expecting the ECB to embark on a series of rate cuts over the next two years, ultimately reaching a final level of 1.5%.

These forecasts are based on statements indicating that the central bank must maintain interest rates at a restrictive level to control inflation dynamics and economic growth trends. It is noted that the ECB could sustain its policy as tightly as necessary.

US inflation data follows US inflation data was released, showing headline inflation at 2.7% and core inflation at 3.3%. These figures, aligning with expectations, received a mild reaction from the market. Notably, there is an increase in expectations for a Fed rate cut in December; a CME survey shows that 98% of participants anticipate such a decision.

The Fed remains determined to continue its strategy of guiding market expectations before announcing its final decision, aiming to create a foundation for the decision to be made without a surprise effect.