Our new baseline has 75bp of ECB cuts in 2024 – Deutsche Bank

Analysts at Deutsche Bank share their revised outlook for the European Central Bank's (ECB) monetary policy.

New baseline has 75bp of cuts in 2024

"We are updating our ECB baseline to a more gradual – and uncertain – easing cycle. We continue to expect the first rate cut in June. We previously expected 125bp of cuts in 2024 and a further 75bp of cuts in H1 2025 to a terminal rate of 2% in mid-2025. Our new baseline has 75bp of cuts in 2024 (risk skewed to 100bp), 100bp of cuts in 2025 and a final 25bp cut in Q1 2026 to a terminal rate of 2%.

"More gradual: We retain the same baseline terminal rate, but three quarters later than in our previous view. Our previous view of the easing cycle was largely built on back-to-back rate cuts. The new baseline assumes a more gradual, one quarter-point cut per quarter pace, throughout the easing cycle."

"More uncertain: A baseline forecast has limitations in an uncertain environment. Our baseline continues to assume a rebalancing economy and monetary policy returning to neutral. However, there are two stages to the easing cycle — dialling back restrictiveness and normalisation — and we have a lower level of conviction on the second stage of easing next year on account of uncertainties associated with the US election, divergent monetary policy cycles and the level of neutral rates."