ECB tipped to cut interest rates four times this year

Economists also expect more cuts next year to bring deposit rate down to 2.25% by end of 2025 from 4% at present, according to the Bloomberg survey

The European Central Bank meets in Frankfurt next week for its first monetary meeting of 2023.

The European Central Bank will cut interest rates a quarter point four times this year, and three more times next year, to bring the deposit rate down to 2.25% by the end of 2025, from 4% at the moment, a major survey of economists has found. 

No changes are expected from the ECB next week when the governing council meets in Frankfurt for its first gathering of the year, according to the Bloomberg survey. 

ECB chiefs, including president Christine Lagarde, this week explicitly embraced the idea of a summer rate cut as traders ignored a pushback from her and her colleagues against their bets that rate cuts will kick off in the spring. 

Markets are now almost evenly split between five and six quarter-point reductions in 2024. They anticipate 1.38% of loosening by year-end, with an 80% chance of the first decrease coming in April. 

A key question is whether Ms Lagarde is prepared next week to elevate the likelihood of an initial cut around mid-year to official ECB guidance. 

The governing council abandoned that policy in July as it neared the end of its hiking cycle, insisting future decisions would hinge on updates of the eurozone’s economic health. 

While summer is emerging as the choice for a growing group of officials — ECB chief economist Philip Lane and Bundesbank president Joachim Nagel are among those signing on to that time line — there’s still room for disagreement. 

• Bloomberg and Irish Examiner staff