ECB March 2025 Preview: Cartier Blanche
Published on
March 5, 2025
Written by
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Arne Petimezas
Senior Analyst
- The ECB will deliver a widely telegraphed and fully priced in 25 bps cut at the March Governing Council meeting. The rate cut will be a hawkish cut, with a subtle message that March is likely the last back-to-back cut. The reason for a hold next month? It’s mostly fiscal;
- The German fiscal announcement is a game-changer in the truest sense of the word. We got two paradigm shifts for the price of one. President Trump’s détente with Russia has forced Germany two abandon the debt brake and rearm. Fiscal policy in the Eurozone is still easy and about to become easier still. I think the ECB will lean against easier fiscal policy;
- If the ECB does accommodate easier fiscal policy, it risks a bond market sell-off similar to the tantrum that the Fed triggered when it cut rates aggressively in September last year. The long end sold off on the Fed’s jumbo cut;
- ECB rate cuts are overpriced. April will be a hold, and cuts beyond June are unlikely to materialize. Ironically, thanks to Trump’s broadsides, the outlook for the Euro Area is brightening.
