Milan, December 12, 2024 – Today’s ECB meeting marked a new step in monetary policy, with a 25-basis-point cut in reference interest rates. According to Christine Lagarde, this decision was made unanimously, although a 50-basis-point cut was also considered. Meanwhile, GDP and inflation forecasts for 2025 were revised downward, with inflation expected to return above 2% only by 2027.
The ECB has adopted a more flexible and “data dependent” approach, removing the explicit commitment to maintain a restrictive policy until the 2% target is achieved. This means monetary policy will be assessed on a meeting-by-meeting basis, depending on macroeconomic data. Regarding the exchange rate, Lagarde emphasized that the central bank will monitor the euro’s performance, particularly if it falls below parity with the dollar, a topic to be addressed in the coming months.
Potential Further Cuts and Market Estimates
The ECB hinted at the possibility of additional rate reductions, considering an acceleration of cuts (up to 50 basis points) in upcoming meetings. Futures on the 3M Euribor suggest deposit rates could reach around 1.75% by the end of 2025, with estimates indicating a possible 2% level as early as June of the same year.
The Influence of Global Context
Antonio Cesarano, Chief Global Strategist at Intermonte, notes that a potential acceleration in rate cuts at the next two meetings, scheduled for January and March, will also depend on the end of the dollar’s strong phase. This scenario could materialize following Donald Trump’s inauguration on January 20. As of now, Futures on the 3M Euribor indicate a near 100% probability of a rate cut at the January meeting.
The ECB appears determined to maintain a cautious yet flexible stance, adapting to the evolving global economic and currency environment.
