Fed or ECB: Who moves first?

In Short

In this Focal Point, we present our revised outlook for the Fed and the ECB and give our answer to two questions that are getting quite popular among investors: Will the November US election affect the Fed decisions? And: will the ECB just follow the Fed in cutting rates rather than acting independently?


  • There is quite a lot of speculation on the magnitude, timing, and sequence of the Fed and ECB first rate cuts.
  • Historically the Fed has tended to lead policy pivots, but evidence is mixed and based on a limited number of cycles. Moreover, the difference in the nature of the 2021-22 inflation spike, more related to the global/supply factor in the euro area than in the US, further weakens the view of the ECB as a follower.
  • Our new baseline forecast foresees a first Fed cut rates on 12 June. We see a total of 75bps rate cuts this year (vs. 90 bps anticipated by markets), with a risk of just 50 bps being implemented. We do not expect the incoming election to play an important role in the monetary policy decision.
  • At the same time, we expect the ECB to move ahead of the Fed and start cutting on June 6 on the back of increasing evidence of disinflation. We look for cumulative cuts of 100 bps in 2024. Then the transatlantic yield spread tightening and USD weakness would be postponed.


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Fed or ECB: Who moves first?

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