Last month (17 Oct), the European Central Bank (ECB) slashed interest rates, lowering policy rates by 25bps. While ECB President Christine Lagarde received several questions on the ECB’s path, she revealed little, emphasizing that the ECB will be completely data dependent and will remain on a meeting-to-meeting basis, UOB Group’s economist Lee Sue Ann notes.

ECB to go on a quarterly cadence towards neutral

“We now look for the European Central Bank (ECB) to cut rates by 25bps again when policymakers convene on 12 Dec for the final time this year. Thereafter, we look for the ECB to go on a quarterly cadence towards neutral.”

“Uncertainties stemming from a second Trump presidency regarding upcoming tariffs, and the US’ support for Ukraine might weigh on economic sentiment for Europe.”

“The broader inflationary outlook remains one of moderating cost pressures, although we think that ECB officials probably expect inflation to sustainably meet the central bank’s target only next year.”