The ECB is expected to start cutting rates in June and cut them by 75 basis points throughout the year

The European Central Bank (ECB) will not cut interest rates as quickly and as sharply as investors think, according to a Bloomberg survey of economists, suggesting that monetary authorities will take some steps to overturn current market expectations at their upcoming policy meeting.

Respondents said the central bank would keep rates unchanged at its Dec. 14 policy meeting; The median expectation among respondents is that the first rate cut will come in June next year, by 25 basis points; This was followed by two successive cuts in September and December, for a total of 75 basis points for the year.

That contrasts with current market pricing, where investors expect cuts of 150 basis points throughout the year, starting in March. In fact, the central bank has already indicated that this expectation is too aggressive, with Slovak (SVK) central bank Governor Peter Kazimir saying that market expectations of a rate cut starting in the first quarter are like "science fiction."

Fabio Balboni, an economist at HSBC, said: "The ECB may want to at least partially dampen the recent shift in market expectations, while also potentially partially unwinding expectations of further policy tightening." But it seems unlikely to give firm forward guidance on the timing of the first rate cut."

David Powell, economist at Bloomberg Economics, said: "The Governing Council is likely to discuss the timing of the end of its PEPP investment programme, the sharp changes in the market pricing of the ECB's policy rate and the latest forecasts from its own economists."

Oliver Lacau, an economist at Oxford Economics, said: "The ECB's recent forecasts for headline and core inflation have come in well below market expectations, which will force the Governing Council to acknowledge that it has made more progress than expected in the fight against inflation."

Andrzej Szczepanjak, an economist at Nomura Securities, said: "The new forecast will show inflation slowing to below 2% faster than currently expected, which means officials' hawkish stance is not convincing." But they have to be firm enough against market pricing that, in the end, the market has got rid of the inflation genie."