PIMCO: ECB expected to slash deposit rate by 25bp in September

PIMCO: ECB expected to slash deposit rate by 25bp in September

9 september 2024

ECB
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PIMCO expects that the European Central Bank (ECB) will cut the deposit facility rate by 25 basis points at its September meeting, from 3.75% to 3.50%.

Konstantin Veit, Portfolio Manager at PIMCO, suggests that the Governing Council (GC) is unlikely to offer much guidance beyond September and is expected to maintain a data-dependent approach.

The new staff macroeconomic projections will likely be little changed, and continue to show inflation around target in 2025 and 2026. Contrary to earlier this year, market pricing seems reasonable and is currently broadly in line with the baseline of quarterly rate cuts from June 2024 onwards, as suggested by Veit.

'Whilst we think the ECB is in no rush to cut rates, it also does not want to keep rates too high for too long. Veit believes that decisions will continue to be made on a meeting-by-meeting basis, and data over the coming months will inform the pace at which the ECB continues to remove additional restrictiveness.'

PIMCO continues to envision that the ECB will cut rates at staff projection meetings and anticipates its third cut in December.

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