The European Central Bank (ECB) is expected to cut deposit rates two more times this year, in September and December, according to more than 80% of economists polled by Reuters. This amount is less than the reduction currently expected by the market.
Since April, economists in a Reuters poll have consistently forecast a total of three cuts this year, including the one in June. In contrast, the interest rate futures market expects as many as four reductions by the end of the year.
An unexpected rise in inflation in the European zone in July, an unemployment rate that is close to historic lows, and economic activity that remains stable in the common currency bloc give ECB policymakers reason to be cautious.
More than 80% of economists, 66 of 81, in a Reuters poll of August 8-13 predicted that the ECB's Governing Council would implement two more rate cuts of 25 basis points this year, in September and December, bringing the deposit rate to 3.25%. This majority view is broadly in line with two previous Reuters polls.
Five respondents expect just one more rate cut this year while another eight predict three rate cuts.
Most expect the ECB's two more rate cuts this year to remain steady despite the volatility in financial markets earlier this month.
After a weaker-than-expected US jobs report in July and inflation edging closer to the Federal Reserve's 2% target, the US rate futures market has forecast as many as 120 basis points of Fed rate cuts in 2024, down from 50 previously. Now, it's about 100 basis points.
The European zone economy, which was expected to grow 0.3% in the last quarter, will average 0.7% growth this year, according to the survey, before expanding by 1.3% in 2025 and 1.4% in 2026.
