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Deutsche Bank says ECB will cut rates in October after inflation drop

BY Reuters | ECONOMIC | 10/01/24 03:05 AM EDT

LONDON, Oct 1 (Reuters) - Deutsche Bank on Tuesday said it now expects the European Central Bank to cut interest rates again in October, after steeper-than-expected falls in inflation across the euro zone in September.

"Following an even deeper dip in September HICP inflation than we were expecting, we are accelerating the next ECB-25 bp (basis point) rate cut from December to October," Deutsche Bank analysts, led by chief economist Mark Wall, said in a note on Tuesday.

They also said a 50-bp cut in December could be a close call if the recent weaker growth and inflation trends continue. Euro zone-wide data will be released at 0900 GMT (1100 CET) and is expected to show year-on-year inflation fell to 1.8% in September, below the ECB's 2% target. (Reporting by Harry Robertson; Editing by Amanda Cooper)

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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