Brokerages Barclays and UBS Global Research advanced their expectations on the start to policy easing by the European Central Bank (ECB) to April, saying cooling inflation and slowing growth might compel it to unwind its hawkish view.

Unlike the U.S. Federal Reserve, the ECB did not signal a pivot. Instead it said it did not even discuss policy easing in the latest meeting and left its rate unchanged at a record-high of 4%.

Despite that, Barclays brought forward its view on the start to rate cuts from July to April, saying a delayed start would force the ECB to play catchup and even raise the quantum of cut to 50 basis points. UBS had earlier anticipated a June start.

Barclays said the rate cuts from April through January 2025 should take the deposit rate to a terminal rate of 2.25%.

Consumer price growth in the euro zone has dropped to 2.4% in November, far more than expected.

"As inflation decelerates and the output gap becomes more negative, the policy stance becomes even more restrictive," said Mariano Cena, economist at Barclays.

"For this reason, we think that it would not be hard to find a consensus among GC (governing council) members to cut policy rates faster toward neutral if the starting date were to be pushed later."

A Reuters poll of economists last week showed expectations that the ECB would start cutting rates in the second quarter of next year.

HSBC expects the first cut in June, significantly ahead of its earlier forecast for December, citing a "tepid" pushback from the ECB against market pricing and softer inflation data.

UBS said the ECB will deliver its second rate cut in June, followed by 25 bps rate cuts per quarter, which will bring down the deposit rate to the "broadly neutral" rate of 2% by the end of 2025.

 

(Reporting by Roshan Abraham in Bengaluru; Editing by Nivedita Bhattacharjee and Arun Koyyur)