(Reuters) – Deutsche Bank said on Wednesday it expects the European Central Bank to cut interest rates by 150 basis points (bps) next year, 50 bps more than their earlier forecast, as inflation cools and central bank officials adopt a less hawkish tone.
The brokerage anticipates consecutive 50 bps cuts in April and June next year, followed by 25 bps cuts each in September and December.
Data this week showed euro zone inflation tumbled to 2.4% in November, coming well below expectations for the third consecutive month.
The ECB’s leading hawk Isabel Schnabel in an interview with Reuters this week took further hikes off the table, prompting traders to bring forward bets of the first rate cut to March next year. They now expect 140 basis points’ worth of easing by December.
“We expect the ECB to keep the guidance that maintaining restrictive rates for sufficiently long will bring inflation back to target in a timely manner,” said Deutsche Bank economists led by Mark Wall.
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