The risks are leaning towards earlier and larger rate cuts by the ECB – Deutsche

<p>The firm says that while the ECB should acknowledge the more positive inflation developments as of late, they will want to steer clear of declaring victory just yet. That should see the central bank maintain its policy guidance on keeping rates higher for longer in order to get inflation back to the 2% target.</p><p>That being said, the struggling Eurozone economy and better inflation outlook suggests that the risks on rates are tilting towards earlier and larger cuts. Deutsche expects the first rate cut to come in April but does not rule out the possibility of a move in March next year. As a whole, they see the ECB cutting rates by 150 bps in 2024 with 50 bps rate cuts in April and June.</p><p>I reckon after the dovish showing by the Fed yesterday, the odds of the ECB being more dovish have also increased somewhat – even if they have some room to stick with the status quo today.</p>

This article was written by Justin Low at www.forexlive.com.