ECB rate decision: A post-summer balancing act

What: ECB Rate Decision

When: Rate decision and press release on Thursday, 12 September at 12:15 GMT (14:15 CET) and post-meeting press conference at 13:00 GMT (15:00 CET)

Expectation: A 25-basis point rate cut is anticipated, but don’t expect any clear forward guidance beyond that. The ECB is expected to remain data-dependent, closely monitoring services inflation and wages. While bond markets are pricing in a 63bps reduction by year-end, with additional cuts at each meeting through the first half of 2025, this outlook appears overly optimistic. A more likely scenario would be gradual rate cuts every quarter, as persistent core inflation pressures will likely prevent the ECB from adopting a more aggressive rate-cutting approach.

How will the market likely react? A 25bps rate cut is expected and largely priced in, so there may be limited immediate impact. However, with no clear forward guidance and the ECB remaining data-dependent, bond markets could see a pullback if expectations for aggressive rate cuts (65bps by year-end) are seen as overly optimistic following Christine Lagarde’s press release. Equity markets may remain subdued, particularly in sectors sensitive to interest rates, while downward revisions to growth forecasts could also dampen risk appetite. Overall, market volatility may persist as investors adjust to the reality of gradual, data-driven rate cuts. Read Althea Spinozzi’s, Saxo’s Head of Fixed Income Strategy, ECB preview for more insights.

The table below shows our views ahead of the September ECB meeting.