ECB & Fed to cut rates sooner

Following the monetary policy meetings of the Fed and ECB, we are changing our forecasts and expect earlier rate cuts than we did before.

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Dr Marco Wagner, Bernd Weidensteiner

Commerzbank Economic Research

December 15 2023

The inflation picture has recently improved in the US and in Europe. Fed and ECB are therefore likely to cut their key rates earlier and more sharply than previously forecast. However, unlike Fed Chairman Powell, ECB President Lagarde tried to rein in the euphoric market expectations. In addition, wage pressure in the eurozone is likely to ensure that inflation settles at 3% rather than 2% in the medium term. This means that the ECB's scope for cutting interest rates remains limited.

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