European Central Bank’s Upcoming Meeting

Investing.com – The European Central Bank (ECB) is set to meet again later this month, with Goldman Sachs predicting another easing of monetary policy following the initiation of rate cuts in June.

ECB officials have suggested that recent data aligns with their baseline scenario, indicating that policy rates could be reduced further if the disinflation trajectory remains intact. An analyst from Goldman Sachs noted this in a report dated August 30.

Several members highlighted the recent slowdown in wage growth as positive news, while some pointed out increasing downside risks to the growth outlook, reinforcing the argument for easing policy restrictions.

According to Goldman Sachs, “Recent commentary hints at a modest shift in perspective from 1-2 additional cuts this year before the summer break to now expecting 2 more cuts, with little inclination for a faster rate cut pace at this time.”

Upcoming indicators and remarks from some ECB officials indicate a slight downgrade in near-term growth, projecting 2024 and 2025 growth rates down by -0.1 percentage points each to 0.8% and 1.3%, respectively.

Goldman Sachs anticipates a revision of core inflation estimates up by +0.1 percentage points to 2.9% in 2024 and +0.1 percentage points to 2.3% in 2025, based on a stronger recent trend, but unchanged for 2026. Factors such as lower oil prices and a stronger euro are expected to be counterbalanced by lower rates and higher gas prices, leaving headline inflation projections steady for 2024, 2025, and 2026.

Given the current situation, “We expect the Governing Council to deliver the widely anticipated second 25 basis point cut on September 12 while making minimal changes to its communication,” Goldman Sachs stated.

“We predict the Council will maintain a data-dependent and meeting-by-meeting strategy without providing explicit future policy guidance. Our forecast remains for gradual quarterly cuts to a terminal rate of 2.25%, though risks appear skewed towards a slower pace, especially in the first half of 2025.”