BofA Sees ECB Rate Cuts Resuming in H2 2027 Amid Energy Price Uncertainty
Bank of America (BofA) is sticking to its forecast that the European Central Bank (ECB) will resume quarterly interest rate cuts in the second half of 2027. According to BofA, the ECB's deposit rate is expected to fall below 2% by 2028, with reductions anticipated in September and December.
The bank attributes the timing of when headline and core inflation returns to or falls below the 2% target to energy price movements. The economic narrative, as described by BofA, remains unchanged, characterized by chronic demand insufficiency and tight monetary policy. These conditions are expected to lead to an inflation undershoot.
The research firm notes that the eurozone was moving toward lower inflation in early 2026 as well. BofA's outlook reflects its expectation that current economic dynamics will persist through the forecast period, implying the ECB will maintain its current policy stance through the first half of 2027 before resuming rate cuts.