Rates Spark: Growth Disappointments On ECB Day

2025-01-31 05:10:00 ET

Summary

• The ECB cut the policy rate to 2.75% as expected, thereby approaching the estimated neutral range of 1.75% to 2.5%.
• Weak growth numbers helped feed the dovish sentiment, and we think the front end of the euro curve can therefore still move lower.
• In the US, we also maintain a bullish bias and will be closely watching PCE data and developments on tariffs closely.

By Michiel Tukker , Benjamin Schroeder

Weak growth and a willing ECB can pull front end of euro swap curve lower

The stagnating eurozone growth set a dovish backdrop for the European Central Bank meeting on Thursday. French, German and Italian GDP numbers for the last quarter of 2024 surprised to the downside, and also the aggregate eurozone growth number disappointed with a 0% quarter-on-quarter reading. Such numbers pave the way for more easing, and indeed, the ECB cut the policy rate by another 25bp as was already widely anticipated....

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