European Central Bank Expected to Cut Rates

Citibank has predicted a prolonged and cautious cycle of interest rate cuts from the European Central Bank (ECB), suggesting a gradual series of 25 basis-point reductions extending into mid-2025, contrasting with market expectations of a swift cut. The ECB is expected to implement its third consecutive interest rate cut this week to stimulate lending amid a weakening eurozone economy and easing inflation. Recent data indicates inflation rebounded to 2.3% in November, raising speculation about the ECB's strategy, with most analysts favoring a quarter-point cut over a more aggressive half-point reduction. Meanwhile, Poland's central bank may cut interest rates in July following political tensions with the ruling party, despite recent comments hinting at a delayed easing until 2026. The economic landscape in Europe remains uncertain, with concerns about U.S. tariffs and political turmoil in major economies adding pressure to ECB policy decisions. Overall, the outlook for European bond yields appears to be mixed, influenced by these anticipated rate adjustments and broader economic conditions.