MARKET OUTLOOK - ECB Set to Cut Rates Next Week, Size to be Determined Last Minute

According to Jussi Hiljanen from SEB Research, it appears likely that the European Central Bank will cut interest rates next week; however, the extent of the cut — whether 25 basis points or 50 basis points — remains uncertain. Recent comments suggest that the Governing Council is divided on the size of the rate cut, but Hiljanen anticipates that the majority will want to see more slowdown in inflation before considering a larger 50 basis points cut. “Still, we expect a softer tone in the December meeting, which should be sufficient to support the current market pricing and potentially facilitate a mildly dovish initial reaction,” he said.