Swiss Life Asset Managers France offers its analysis of upcoming monetary policy challenges, as the European Central Bank bides its time ahead of a decision expected in September.
With all eyes on Christine Lagarde’s speech on July 24, the ECB is moving toward a strategic pause in its rate-cutting cycle. A decision widely anticipated by the markets, but one that raises many questions about what comes next: should we expect further monetary easing as early as September?
Swiss Life AM: A Rate Cut Likely in September
For Édouard Faure, Head of Fixed Income at Swiss Life Asset Managers France, the most likely scenario remains another rate cut in the fall, provided the slowdown in inflation is confirmed.
“We anticipate a slight decline in inflation, to 1.9% in 2025, then to 1.8% in 2026. This gives the ECB room to continue its easing cycle without taking excessive risks regarding its price stability target.”
Upcoming macroeconomic data releases, particularly those related to purchasing power and employment, will be key to refining this timeline.
The central bank will also have to contend with the lagged effects of its past monetary policy, the impact of which on consumption has yet to be quantified.
The issue of financial fragmentation among eurozone countries could also resurface if growth differentials widen again.
In this context, clear and gradual communication remains a key strategic tool to prevent any market overreaction.
A Window of Opportunity for Credit
In an environment where rates could remain low for longer, conditions remain generally favorable for credit. Demand remains strong, including in riskier segments, despite mixed half-year results.
Swiss Life AM nevertheless emphasizes the need for greater selectivity:
“Further easing would be welcomed, unless it stems from a too-sharp deterioration in the macro outlook. In that case, spreads could widen on the weakest issuers.”
An international context to watch
Trade tensions between the United States and Europe, with a new deadline set for early August, remain under close watch. Should tensions escalate, the Fed could be forced to act sooner, indirectly influencing the ECB’s strategy.
In this context, maintaining room for maneuver becomes essential for the ECB, which cannot risk destabilizing markets with unexpected moves.
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