Investing.com - The European Central Bank is expected to reduce interest rates by a quarter of a percentage point at every meeting "until at least the summer", according to analysts at Citi.
Economists widely expect the ECB to cut rates by 25 basis points at its upcoming policy meeting this week, after having previously slashed borrowing costs four times last year to address weak growth and cooling inflation in the Eurozone currency bloc.
Traders increased these wagers last week after US President Donald Trump stopped short of formally slapping sweeping new import tariffs on the European Union, with money markets now anticipating a total of four drawdowns in 2025. That would bring the rate the ECB pays on deposits by Eurozone lenders -- which now stands at 3.0% -- to 2% by the end of the year.
Meanwhile, policymakers at the central bank have bolstered forecasts for a reduction at the ECB's January meeting. ECB President Christine Lagarde, along with a slate of other officials at the central bank, have supported bringing down rates further.
Lagarde, in particular, told CNBC at the World Economic Forum in Davos, Switzerland last week that a "gradual move is certainly something that comes to mind at the moment".
Writing in a note to clients, the Citi analysts said they see "the variance of plausible outcomes as narrow in the first half of the year, with very low risk of rate cut acceleration, and only a small risk of deceleration".
They predicted the ECB could even continue to draw down its key deposit rate "likely beyond" the summer until it is "well below 2%", although they flagged the path of borrowing cost cuts is "much more uncertain in the second half of the year" due in part to "deteriorating international relations" possibly leading to "exogenous shocks" to the Eurozone economy.