ECB cut its set of policy rates on 17 October by 25 bps, lowering the deposit rate to 3.25 per cent. Fitch expects a further 25-bps cut at December’s governing council meeting and quarterly 25-bps cuts throughout 2025 for a total of 100 bps for the year, the rating agency said in a release.

Nevertheless, rates will remain in restrictive territory throughout most of 2025 reflecting still high wage and services price inflation. Fitch sees 2 per cent as a neutral policy rate for the eurozone and the likely end-point for rates in this cycle.

Headline inflation has declined more swiftly than the ECB expected to just 1.7 per cent in September, helped by falling energy prices. Fitch expects it to accelerate over the coming quarter on energy price base effects.

Core inflation fell to 2.7 per cent in the eurozone. Although unemployment has yet to rise, labour markets are cooling and wage pressures subsiding.

Past monetary tightening is clearly still affecting the economy and ECB appears concerned that eurozone economic growth will undershoot its September forecasts, putting more downside pressure on inflation when it already close to target, the rating agency added.

Fibre2Fashion News Desk (DS)