ECB Rate Cuts: ING Analyst Predicts One or Two More Cuts by Spring 2026

Central Bank Policy Week

• 🗓️ The final major policy week of the year features nine central banks, including the ECB, Bank of England, and Bank of Japan.
• 🌍 Global interest rate cycles are shifting, with pressure rising everywhere except potentially the US.

Federal Reserve Outlook

• 📉 Markets anticipate two Fed rate cuts this year, despite officials signaling only one.
• 💡 The analyst believes the US economy will face a soft patch, justifying further Fed rate cuts, possibly totaling 50 basis points by early 2026.
• 📈 Inflationary pressures from tariffs are expected to impact consumers in 2026.

European Central Bank (ECB) Strategy

• ⚠️ Market expectations of ECB rate hikes are deemed premature, possibly influenced by comments hinting at future hikes.
• 🚫 No justification for an ECB rate hike is seen in the short term due to slowing Eurozone growth and anticipated sharp inflation decreases.
• ✂️ The analyst predicts the ECB might be forced to cut rates one or two more times between now and spring 2026.
• 📈 Inflationary pressures might increase in late 2026 or early 2027 due to fiscal stimulus, potentially leading the ECB to consider hikes then.

Bank of England and Bank of Japan

• 🏦 The Bank of England is likely to cut rates, despite sharp divisions within the committee.
• 🇯🇵 The Bank of Japan is also expected to hike rates, especially if a large fiscal stimulus package is approved.
• 📊 Central banks globally are grappling with inflation that has fallen but not enough, increasing government debt, and economies showing resilience but not thriving.