Amundi Sees ECB Cutting Twice More Even as Traders Bet It’s Done

Amundi SA's Chief Investment Officer, Vincent Mortier, anticipates the European Central Bank will implement two additional interest rate cuts, citing expectations of persistent lackluster economic growth. This projection sharply contrasts with current money market sentiment, which has significantly reduced easing bets, now pricing only a 40% probability of a single quarter-point cut by mid-2025, down from over 60% prior to the ECB's recent decision to hold rates.

Analysis

A significant divergence in outlook for European Central Bank monetary policy has emerged between Amundi SA and current market pricing. Amundi's Chief Investment Officer, Vincent Mortier, is forecasting two additional interest rate cuts, predicated on an expectation of continued lackluster economic growth within the Eurozone. This contrarian view stands in stark contrast to money market sentiment, where bets on further easing have diminished substantially. Following the ECB's recent decision to hold rates, the market-implied probability of a single quarter-point cut by mid-2025 has fallen from over 60% to just 40%, indicating that traders are increasingly positioning for the ECB's easing cycle to be complete.

Key Decisions for Investors

• Investors should recognize the pronounced disconnect between Amundi's forecast for two more rate cuts and the market's pricing, which implies a high probability of no further easing, creating potential for mispricing in European rate-sensitive assets.
• Monitor upcoming Eurozone economic growth indicators closely, as any data confirming Amundi's 'lackluster' growth thesis could trigger a dovish repricing in money markets, while stronger data would validate the current market stance.
• Consider expressing a directional view on this divergence through European fixed-income positioning or interest rate derivatives, as a confirmation of either outlook would likely lead to a significant adjustment in short-term yield expectations.