HSBC, the UK-based multinational investment bank and financial services company, has revised its interest rate expectations for the European Central Bank (ECB). According to HSBC economists, the ECB is expected to reduce interest rates at each meeting between October and April, bringing the main deposit rate down to 2.25%.
This prediction suggests that the ECB will take new steps towards monetary easing due to a decline in inflation across Europe.
“Insurance” Qualities of Interest Rate Cuts
In their analysis, HSBC economists Simon Wells and Fabio Balboni note that even if economic supply remains weak and the labor market gradually cools, some policymakers may be convinced that “insurance” rate cuts are necessary to support the economy.
HSBC’s note emphasizes, “Policy should be close to neutral or even slightly accommodative. Previously, we expected a rate cut at every other meeting until the deposit rate reaches 2.50% in September 2025.”
Recent survey data indicates that business activity across the eurozone sharply and unexpectedly contracted this month, with the dominant services sector stagnating. This has heightened expectations that the ECB may soon implement further interest rate cuts. The central bank already executed its second rate cut of the year in September.
In summary, HSBC’s revised outlook reflects a growing belief that the ECB will need to adjust its monetary policy in response to economic conditions, emphasizing a proactive approach to fostering economic stability.
