ECB watchers see more rate cuts to come after October decision

Economists and market analysts are in broad agreement that the European Central Bank (ECB) will continue cutting interest rates at each meeting for the foreseeable future, following Thursday's decision to reduce rates by 25 basis points.

Here is what ECB watchers had to say about the rate-cut decision and future outlook.

Ruben Segura-Cayuela, European economist at Bank of America, highlighted the dovish tone in Lagarde's remarks, particularly her focus on downside risks to inflation.

"The fact that Lagarde told us that there are more downside than upside risks to inflation is more meaningful," he said.

He added that this clearly "leaves the door wide open for back-to-back cuts," noting that the disinflationary process is progressing well.

Segura-Cayuela expects rate cuts at every ECB meeting until the deposit facility rate reaches 2% by June 2025, followed by two quarterly cuts to bring it down to 1.5% by December 2025.

He sees December 2024 as a critical juncture, provided no significant shocks occur before then.

Carsten Brzeski, Global Head of Macro at ING, echoed similar sentiments about the ECB's concern over the eurozone's economic outlook.

"The ECB must have become much more concerned about the eurozone's growth outlook and the risk of inflation undershooting the target," Brzeski stated.

He believes the ECB will continue cutting rates as long as there is no substantial recovery in economic activity or inflationary pressures, signalling a prolonged period of monetary easing.

"It looks like they’re aiming to bring interest rates to neutral levels as quickly as possible," said Brzeski.

Danske Bank analysts also raised questions about how long the ECB can maintain its restrictive policy stance.

In their view, the ECB is