Goldman Sachs and JPMorgan Expect ECB to Cut Rates in October, Sending Shockwaves Through European Markets
In a surprising turn of events, major brokerages like Goldman Sachs and JPMorgan are now predicting that the European Central Bank will announce a quarter-point rate cut at its upcoming meeting on October 17. This change in forecast comes after recent data has revealed economic weakness and slowing inflation in the eurozone.
Market expectations are currently pricing in a 70% chance of a rate cut, following similar moves by the ECB in June and September. The decision to prioritize growth over inflation pressures has been driven by a sharp contraction in eurozone business activity, with both the services and manufacturing sectors showing signs of decline.
Sources within the ECB have indicated that policy doves are gearing up to push for a rate cut in October, despite potential resistance from more conservative members. This represents a shift from the sentiment following the ECB's September meeting, when an October rate cut seemed unlikely.
Here are the latest rate cut forecasts from leading brokerages:
- Goldman Sachs: 25 bps, reaching 2.0% by June 2025
- JPMorgan: 25 bps, targeting 2.0% by June 2025
- HSBC: 25 bps, aiming for 2.25% by April 2025
- BNP Paribas: 25 bps, projecting 2.25% by the end of 2025
Analysis:
The potential rate cut by the ECB could have significant implications for European markets and the global economy. Investors should closely monitor developments leading up to the October 17 meeting to position their portfolios accordingly. Lower interest rates could stimulate economic growth but may also signal concerns about the overall health of the eurozone. Stay tuned for further updates as this story unfolds.