Nomura, a prominent financial services group, has adjusted its forecast for the European Central Bank's (ECB) monetary policy, signaling a departure from its pr



Nomura Revises ECB Rate Cut Forecast: Gradual Reductions Anticipated


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Nomura, a prominent financial services group, has adjusted its forecast for the European Central Bank's (ECB) monetary policy, signaling a departure from its previous expectations. Here's a breakdown of the revised forecast:

1. Shift in Expectations: Nomura now foresees a series of 25 basis point reductions in ECB rates, deviating from its earlier projection of a rate cut in July. The new timeline includes cuts in June, September, and December of this year, followed by similar reductions in March, June, and September of the following year.

2. Economic Indicators: The decision to revise the forecast is grounded in several economic indicators. Resilience in the labor market, persistent services inflation, and an upswing in economic growth contribute to Nomura's revised outlook. Additionally, the ECB's recent hawkish rhetoric suggests a more gradual approach to rate cuts.

3. Terminal Rate Forecast: Nomura maintains its terminal rate forecast at 2.50%, indicating an expectation for the ECB to lower rates to the upper range of what it considers neutral. This revision aligns with Nomura's view, including a rate cut in September of the following year.

4. Factors Driving the Revision: Stronger economic activity data, robust demand, higher-than-anticipated wage growth, and support from traditionally dovish ECB members have influenced Nomura's decision. The analysis suggests that the ECB is likely to adopt a measured pace of rate reductions to preserve monetary restrictiveness.

5. Data Dependency: While the ECB's actions remain contingent on economic data, Nomura believes that the current scenario favors a gradual pace of three cuts this year. However, the outlook could evolve based on future economic conditions.

Nomura's revised forecast reflects a nuanced assessment of economic dynamics and ECB policy stances, providing valuable insights for market participants navigating the evolving monetary landscape.

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