HSBC: It is expected that the European Central Bank will change its interest rate cut trajectory, with a rate cut at every meeting starting from October.

HSBC economists Simon Wells and Fabio Balboni said that the European Central Bank will cut interest rates at every meeting from October to April. The two economists stated in a report on Wednesday, "Therefore, even though the economic supply side remains weak and the labor market is only gradually cooling, more policymakers may believe that some 'precautionary' rate cuts may be needed." They added, "The ECB may want to lower rates to encourage households to reduce savings, as high savings rates have been a major drag on spending growth recently." HSBC's envisioned five cuts would bring the deposit rate to 2.25%. The new rate path differs from previous forecasts, which predicted a cut at each meeting until the benchmark rate reached 2.5% in September. Wells and Balboni said, "Concerns on the supply side, as well as the persistent uncertainty about the inflation landing zone in the euro area (not likely to be resolved until the first half of 2025 at the earliest) should mean that the ECB sees no need to cut rates by half a percentage point following the Federal Reserve."