The euro-zone will remain close to recession in the first half of the year as the effects of higher interest rates continue to weigh on household consumption and investment, and fiscal policy is tightened. Headline inflation will be close to the ECB’s 2% target for most of 2024 and core inflation will fall further. This should allow the ECB to begin a policy easing cycle around April. Elsewhere, we suspect that against the backdrop of continued low inflation, the SNB will start loosening policy in March. The Riksbank is likely to respond to the deep recession in Sweden by cutting rates in Q2. We also expect a sharp drop in inflation to cause Norges Bank to slash rates faster than its forecasts imply.
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