Goldman Sachs pushes back ECB rate-cut forecast to June from April

Goldman Sachs on Friday forecast the European Central Bank will start cutting interest rates starting in June, after data showed slightly hotter-than-expected inflation in the region.

The Wall-Street brokerage had earlier estimated the central bank to start reducing borrowing costs in April.

Goldman now expects five 25-basis-point(bps) cuts in the year, down from six earlier, it said in a research note.

For the next year,Goldman expects two 25 bps cuts compared to one earlier.

Inflation across the 20-nation euro zone fell to 2.6% in February from 2.8% a month earlier, just shy of expectations of 2.5%, according to data from Eurostat, the EU’s statistics agency showed on Friday.

Crucial core figures, which strip out volatile food and fuel prices, declined to 3.1% from 3.3%, also missing expectations of 2.9% and holding uncomfortably above the ECB’s 2% target.

“Two consecutive upside surprises to the sequential core (inflation) pace in the January and February releases have lowered the odds of an earlier cut,” Goldman economists said in a note.

Meanwhile, traders are betting on a 77.6% chance for the central bank to start cutting interest rates in June, as per LSEG data.
Source: Reuters (Reporting by Siddarth S and Roshan Abraham in Bengaluru; Editing by Devika Syamnath)