BofA Sticks to Rate Cut Forecast as ECB Eyes Second-Half Rebound
Bank of America (BofA) is maintaining its forecast that the European Central Bank (ECB) will resume quarterly interest rate cuts in the second half of 2027. The bank predicts these reductions to occur in September and December.
The deposit rate at the ECB is expected to fall below 2% by 2028, according to BofA's projections. However, the timing for headline and core inflation returning to or falling below the 2% target depends on energy price movements.
Bank of America describes the underlying economic narrative as unchanged, characterized by chronic demand insufficiency and tight monetary policy. The firm believes these conditions will eventually lead to an inflation undershoot.
The eurozone was moving towards lower inflation in early 2026, with BofA's outlook reflecting expectations that current economic dynamics will persist through the forecast period.