© Reuters. FILE PHOTO: A view shows the logo of the European Central Bank (ECB) outside its headquarters in Frankfurt, Germany March 16, 2023. REUTERS/Heiko Becker/File Photo
(Reuters) – Goldman Sachs (NYSE:) on Friday forecast the European Central Bank will start cutting interest rates starting in June, after data showed slightly hotter-than-expected inflation in the region.
The Wall-Street brokerage had earlier estimated the central bank to start reducing borrowing costs in April.
Goldman now expects five 25-basis-point(bps) cuts in the year, down from six earlier, it said in a research note.
For the next year, Goldman expects two 25 bps cuts compared to one earlier.
Inflation across the 20-nation euro zone fell to 2.6% in February from 2.8% a month earlier, just shy of expectations of 2.5%, according to data from Eurostat, the EU’s statistics agency showed on Friday.
Crucial core figures, which strip out volatile food and fuel prices, declined to 3.1% from 3.3%, also missing expectations of 2.9% and holding uncomfortably above the ECB’s 2% target.
“Two consecutive upside surprises to the sequential core (inflation) pace in the January and February releases have lowered the odds of an earlier cut,” Goldman economists said in a note.
Meanwhile, traders are betting on a 77.6% chance for the central bank to start cutting interest rates in June, as per LSEG data.
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