BofA Sees ECB Rate Cuts Resuming in H2 2027

Bank of America (BofA) is maintaining its forecast that the European Central Bank will resume quarterly interest rate cuts in the second half of 2027. The bank projects two reductions, one in September and another in December.

The ECB's deposit rate is expected to fall below 2% in 2028. BofA notes that the timing of when headline and core inflation return to or fall below the 2% target depends on energy price movements.

According to BofA, the underlying economic narrative remains unchanged, characterized by chronic demand insufficiency and tight monetary policy. The firm believes these conditions will eventually lead to an inflation undershoot.