Having agreed to do so at their last meeting, we think the ECB Governing Council will go ahead and cut the deposit rate by 25bp next week, to 3.75%. As the recent inflation data have been a bit higher than the Bank had expected, back-to-back rate cuts now seem unlikely. But on balance, we still think the disinflation process is broadly on track so we forecast a total of four 25bp rate cuts this year, which would bring the deposit rate down to 3.0% by December.
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