Berenberg Says ECB Rate Cut More Likely If Inflation Drops Further But Not Its Forecast

11:03 AM EST, 02/03/2026 (MT Newswires) -- Amid robust growth and inflation at the 2% target in the eurozone, the European Central Bank (ECB) currently has no reason to change its monetary policy stance, said Berenberg.

All observers polled by Bloomberg expect the ECB to leave the deposit rate unchanged at 2.0% for the fifth consecutive time at its meeting on Thursday, noted the bank. The various upside and downside risks to growth and inflation appear to be broadly balanced.

However, the strength of the euro against the US dollar (USD) slightly increases the risk of inflation falling below the 2% target during the year, stated Berenberg.

The euro has strengthened by 2.5% against the US dollar since the ECB finalized its economic projections for the December meeting on Dec. 3. If the euro continues to appreciate until the ECB meeting on March 19, when the new forecasts will be presented, the ECB will ultimately have to lower its inflation forecast from December, which at 1.9% for this year and 1.8 % for 2027 is already below the target of 2%, pointed out the bank.

This would make another rate cut more likely, added Berenberg.

Overall, the bank doesn't forecast the ECB to change its key interest rate for some time, unless there are major shocks.

As a consequence, Berenberg maintains its call that it will take until mid-2027 before rising inflation, driven by higher wage growth, will eventually force the ECB to gradually raise its deposit rate from 2.0% to 3.0% in early 2028.

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