Nomura Securities update forecast: European Bank will cut interest rates in June, but not in July!

Nomura has revised its forecast for the European Central Bank's monetary policy, abandoning expectations for a rate cut in July. The financial services group now expects the ECB to cut interest rates by 25 basis points in a row in June, September and December, followed by similar cuts in March, June and September.

The next two interest rate decisions of the European Central Bank will be held on June 6 and July 18, respectively.

Nomura's decision to change its forecast for an ECB rate cut is based on several economic indicators: the eurozone labour market and wages are showing resilience, and service sector inflation is persisting.

In addition, economic growth in the eurozone is picking up and the European Central Bank's rhetoric has recently become more hawkish. These factors have prompted Nomura to predict that the European Central Bank will take a more gradual approach to cutting interest rates.

Nomura kept its final rate forecast at 2.50%, indicating that it still expects the ECB to cut rates to the upper end of what it considers its neutral range. The revision included an additional cut in September the following year to align with this end point view.

Nomura's analysis suggests that with stronger economic activity data in the euro area, strong demand, an encouraging labor market, higher-than-expected wage growth, and persistent service sector inflation, the European Central Bank is likely to adopt a more cautious pace of rate cuts to maintain some degree of monetary restraint.

In addition, Nomura pointed out that even traditionally dovish members of the ECB's governing council are advocating a smaller rate cut this year in favor of a slower pace of easing than initially expected.

Although the ECB's actions are still dependent on data, and if economic conditions deteriorate, the ECB may take more aggressive interest rate cuts, but Nomura believes that the most likely scenario now is that the ECB will gradually cut interest rates three times this year.

According to the above news, although Nomura believes that the European Central Bank will not cut interest rates in July, it still believes that interest rates will be gradually cut three times this year, in June, September and December, which will weigh on the euro and be vigilant against the risk of falling back against the dollar.

EUR/USD daily chart

At 10:41 on May 20, Beijing time, the euro was trading at 1.0873/74 against the dollar.

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