MNI ECB Preview, Jan'25: An 'Easy' Step Nearer Neutral

EXECUTIVE SUMMARY

• The ECB is fully expected to cut its three key rates by 25bp on Thursday, taking its deposit rate to 2.75%.
• It’s a step closer to neutral rates, which President Lagarde sees in the 1.75-2.25% range, something that should make this decision relatively straightforward.
• More in-depth discussions around neutral should start to take more prominence but we expect greater focus on that to come with the next meeting in March and its fresh quarterly forecasts.
• With no changes in key guidance expected, we expect commentary around US policy spillovers to set the tone for the press conference.
• The market currently mostly prices another 25bp cut in March, perhaps leaving some modest asymmetric risk to a hawkish surprise.
• Terminal rates meanwhile are priced at circa 2% having lifted some 30bps since the last meeting. Analysts are more mixed here, with a wide range of 1-2.25% seen across the 24 analysts reviewed below.

Please find the full report here: ECBPreview - Jan2025.pdf