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Inflation improvement in 2024 will allow ECB and Fed to ease – ANZ

Economists at ANZ Bank analyze Fed and ECB outlook in a year of transition.

ECB will start cutting rates this European spring

Our core view is there will be sufficient progress on inflation towards target in both the US and Euro Area this year for the Fed and ECB to start cutting interest rates. 

We think the conditions for ECB rate cuts will be in place from the European spring. In the US, we acknowledge recent low inflation prints but still think it will be the northern hemisphere summer before the FOMC will feel sufficiently confident to cut rates. 

We forecast the FOMC will cut the target for fed funds by 100 bps taking the fed funds ceiling to 4.50% by year-end. We forecast the ECB will cut key policy rates by 150 bps by year-end.

 

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