By July ECB rate will be below 3.0%

Markets worldwide are positioning themselves for rate cuts in the new year, creating sharp falls in yields and a boom for risk assets. 

But nowhere has that shift been more dramatic than in the eurozone.

Its policy rate stands now at 4.0%, having been raised most recently in September

By July of next year, the overnight index swaps market now suggests that it will be below 3.0%. 

Swaps have slashed 50 basis points from that forecast in barely a week:

Monetarists’ arguments about the problems caused by a sharply decreasing money supply, in real terms

After a big expansion at the beginning of the pandemic, the quantity of money is contracting to an extent never before seen since the creation of the euro in 1999

John Authers Bloomberg 7 december 2023 

https://www.bloomberg.com/opinion/articles/2023-12-07/europe-rate-hopes-make-markets-believe-again-after-years-of-disappointment

Investors bet on rapid ECB rate cuts as economic outlook darkens

Core inflation — which excludes energy and food to provide a better gauge of underlying price pressures — remains at 3.6 per cent, while the eurozone economy has been stagnant for most of the year.  

FT 7 December 2023

Investors bet on rapid ECB rate cuts as economic outlook darkens (ft.com)

If markets are right, the ECB will be the first among major central banks to cut next year

With rapidly weakening inflation, a feeble economy, and one hawkish policymaker changing tack, traders are heaping bets on a reduction as soon as March. 

They’re now seeing the rate falling to 2.5% by the end of 2024; just last week, they envisaged borrowing costs staying above 3%.

https://www.bloomberg.com/news/articles/2023-12-07/ecb-s-lagarde-squeezed-as-markets-boost-2024-rate-cut-bets

ECB 

Englund: ECB (englundmacro.blogspot.com)