MARKET OUTLOOK - ECB May Lower Deposit Rate Below 2% Next Year

Forex - Claus Vistesen and Melanie Debono from Pantheon Macroeconomics argue that the European Central Bank will refrain from more aggressive interest rate cuts this month, but is likely to implement more gradual reductions next year.

According to Vistesen and Debono, inflation in the Eurozone rose in November as indicated by last week's data, which will lead the ECB to opt for a 25 basis point cut instead of a 50 basis point reduction at its December policy meeting.

However, according to economists, the ECB's more dovish rate setters have an increasingly compelling argument for further rate cuts, and the bank is likely to lower borrowing costs at least three times in the first half of 2025, potentially bringing the deposit rate below 2% next year.