Factbox: Big Banks Adjust ECB Forecasts for October Cuts – Reuters

LONDON (Reuters) – Major brokerage firms, including Goldman Sachs and JPMorgan, have updated their expectations for the European Central Bank (ECB) to implement a quarter-point interest rate cut during its meeting on October 17. This shift follows the release of recent economic data indicating a slowdown in growth and inflation.

Current market indicators suggest there is approximately an 80% probability of such a rate reduction, which would come after similar cuts in June and September. The evolving data appears to be prompting policymakers to prioritize economic growth over inflation concerns.

Recent surveys have highlighted a significant and unexpected contraction in euro zone business activity for September. Notably, the services sector stagnated, and a decline in manufacturing intensified. Additionally, inflation reports from France and Spain for September were markedly subdued.

Sources have indicated that advocates for looser monetary policy within the ECB are gearing up to support an October rate cut, although they may encounter pushback from more fiscally conservative colleagues. This is a notable shift from their post-September meeting sentiment, where an October reduction seemed unlikely.

Below are the updated forecasts from several brokerage firms regarding the potential rate cut:

• Goldman Sachs: 25 basis points cut, terminal rate of 2.0% (June 2025)
• HSBC: 25 basis points cut, terminal rate of 2.25% (April 2025)
• BNP Paribas: 25 basis points cut, terminal rate of 2.25% (end of 2025 forecast)
• RBC: 25 basis points cut, terminal rate of 2.25% (April 2025)
• JPMorgan: 25 basis points cut, terminal rate of 2.0% (June 2025)
• Barclays: 25 basis points cut, terminal rate between 2.0% and 2.5% (mid-2025)
• Deutsche Bank: 25 basis points cut, forecast under 2%
• Citi: 25 basis points cut, terminal rate of 2.25% (end of 2025 forecast)
• UBS: 25 basis points cut, terminal rate of 2.25% (end of 2025 forecast)
• ING: 25 basis points cut, terminal rate of 2.25% (end of 2025 forecast)
• BBVA: 25 basis points cut, terminal rate of 2.75% (November 2025)
• SEB: 25 basis points cut, terminal rate of 2.0% (end of 2025)

This adjustment in expectations reflects the ongoing economic challenges faced by the euro zone and the evolving stance of the ECB amidst cooling price pressures.