Big banks expect a quarter-point cut for ECB’s first meeting of 2025

Major brokerages including Bank of America, Goldman Sachs and Citigroup expect the European Central bank to cut interest rates by 25 basis points again at its first meeting of 2025 on Jan. 30 as inflation slows.

Forecasters at financial institutions also see further rate cuts in 2025, with the ECB’s benchmark rate largely expected to fall below the 2%-2.5% range economists view as neutral, meaning it neither stimulates nor restricts the economy.

Money markets show traders see euro zone rates falling to around 1.85% by the end of next year, from 3% now. .

Euro zone business activity declined sharply in November, PMI showed last week, as the bloc’s dominant services sector joined the manufacturing sector in contracting.

Inflation in the euro zone, meanwhile, edged up to 2.3% in November, from 2.% in October. The ECB now expects inflation across the single-currency bloc to reach 2.1% next year and 1.9% in 2026, roughly in line with its 2% target rate.

Forecasts of major brokerages before the January policy meeting:

Brokerage	Jan’25 rate cut forecast (bps)	2025 forecast (bps)	Terminal rate/end ’25 forecast
BofA Global Research	25	150	1.50% (Sept 2025)
Goldman Sachs	25	125	1.75% (July 2025)
ING	25	125	1.75% (July 2025)
J.P.Morgan	25	125	1.75%
Citigroup	25	150	1.50%
Barclays	25	150	1.50%
Morgan Stanley	25	–	1% (2026)
Deutsche Bank	25	150	1.50%
Societe Generale	25
Wells Fargo	25	125	1.75%
Nomura	25	125	1.75% (Sept 2025)
Peel Hunt	25	100	2.00%
UBS	25	100	2.00% (June 2025)

Source : Reuters